Exchange Rate Pressures Induce Bottom line Losses


In its recently released FY 2021 result, International Breweries (“the Company”) recorded a 33% revenue growth to N182.30bn in FY 2021 from N136.79bn in FY 2020. The revenue growth was due to a combination of higher pricing implemented and volume growth. We believe that the Company’s newly launched Trophy Stout product was partly responsible for the volume growth.

Cost of sales rose by 28% to N135.99bn from N106.32bn in FY 2021. Higher input prices due to rising global commodities prices were the significant cost drivers. However, the Company’s successful implementation of price increases supported margins, as gross margin expanded by 300 basis points to 25% in FY 2021 (FY 2020: 22%).

Loss before tax improved by 10% YoY to N19.84bn, due to a lower other losses incurred in FY 2021. The losses were related to exchange rate movement during the period. In addition, net impairments on financial assets declined by 83% which factored in the loss moderation in FY 2021. Finance cost increased by 51% YoY, on the back of higher borrowings. However, the increase in finance cost was offset by a 100% rise in finance income. Thus, net finance cost was flat at N1.79bn in FY 2021 (FY 2020: N1.67bn).

Finally, Profit Surfaces in Q1 2022 after Four (4) Years of Losses

The Group recently released its Q1 2022 financial statements, where it reported a solid double digit 48% YoY growth in revenue to N57.52bn from N38.94bn in Q1 2021. The revenue growth was achieved by sustained price increase and improved volume sales. According to the Company, Trophy Stout – one of the recently launched products sustained its strong momentum with a relatively high consumer reception. Also, an aggressive push for the sale of high-end products supported volume growth.


Profit before tax stood at N1.86bn, from a loss of N3.56bn in Q1 2021; while profit after tax stood at N721mn from a N2.58bn loss in Q1 2021.   


We project a revenue growth of 28% YoY to N233.28bn in FY 2022 and profit after tax of N9.47bn. Our revenue growth stems from expected price increases and volume growth in FY 2022. However, we expect cost pressures emanating from sustained global supply chain disruptions and heightened inflation to be a constraint in the near term.


We understand that there was an industry-wide action on price increases to offset rising input cost; however, we do not expect the trend to be sustainable over time. At some point, we expect consumers would most likely react. In the medium term, we expect to see future capacity expansions to be the growth driver.


Using a blend of DCF models, Residual Income Model and EV/EBITDA valuation methodologies, we estimate a N5.84 fair value of the stock. At N8.10 current market price, the stock trades at a premium to our fair value with a 28% downside. Thus, we recommend a SELL

Please follow the link “International Breweries Plc FY 2021 and Q1 2022 -Aggressive Pricing Delivers First Profit”  to view the whole report.

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