A significantly higher operating costs (due to heightened inflationary pressures), and foreign exchange illiquidity presented significant headwinds to Nigerian Breweries in the 2022 fiscal year. Although revenue grew by 26% year-on-year to N550.64bn, EBITDA margin declined by 234 basis points to c.17% in FY 2022 from 19% in FY 2021. Net margin stood at 2% in FY 2022, down from 3% in FY 2021.

The Group raised prices across its product categories, given the rising input costs amid global supply chain disruptions and higher commodity prices in the global market.

The Group incurred N26.34bn foreign exchange losses in FY 2022 (+274% higher than N7.04bn FX loss in FY 2021). The average exchange rate rose by 6% to N449 in the I & E FX window in 2022. However, liquidity in that market was below average as sources of FX supply remained weak. In the more accessible parallel market, the exchange rate rose by 30% to an average of N740.

Owing to the steep FX losses, profit before tax dipped by 27% year-on-year to N17.34bn. On a positive note, the effective tax rate in FY 2022 was lower. The effective tax rate stood at 24% in FY 2022, down from 47% in FY 2021. As a result, the Group’s net profit grew marginally by 4% year-on-year.

Total assets rose by 28% to N619.89bn in FY 2022. The Group expanded capacity reflected in the 40% year-on-year growth in property, plant and equipment (PPE) to N358.97bn. The capacity expansion also reflected in the 65% capex increase to N97.86bn.

Net operating cash flow declined by 75% year-on-year to N22.53bn, due to higher working capital outflows. Free cash flow was negative in FY 2022, because of higher capex.

However, a net debt inflow of N89.50bn helped the Group to close the year with a higher cash balance. Final Dividend Declared Decreases by 14%.

The Group declared a N1.03 final dividend for FY 2022 – a 14% decline from N1.20 in FY 2021. Having declared a 40 kobo interim dividend during the fiscal year, the total dividend for FY 2022 stands at N1.43 (FY 2021: N1.60), representing an 90% dividend payout in FY 2022.


While the Group did fairly well on a full-year basis in 2022, we note that the current operating environment may present significant headwinds for the Group in the near term. We saw the trend in H2 2022 – particularly in Q4 2022 where operating profit declined by 2% year-on-year to N16.37bn, despite a 23% revenue growth to N157.19bn. The Group reported a N1.57bn net loss, on the back of FX losses.

The challenges with FX are still present, in our view, and we expect further currency depreciations in the near term given the poor state of the Nigerian foreign exchange market. However, beyond the FX losses, we see potential challenges to come from the recent Naira redesign policy which has led to a cash crunch. The point-of-sale nature of the Group’s products makes it highly vulnerable to the Naira policy. Depending on how long the cash crunch lasts, we might see lower volumes in 2023. Working capital could further deteriorate as well. On another hand, the Group’s intensified efforts to enhance its route-to-market and product innovation are expected to be positive for topline growth. In Q4 2022, the Group launched ‘Zagg’, a malted energy drink and according to the management, the reception of the product since launch has been good. Although we do not expect the product to materially drive topline growth in 2023, we believe that other forms of innovation across key products could be beneficial to the Group

We recommend BUY for Nigerian Breweries, nonetheless, inspite of the challenges. The Group’s current market value is N339bn, which implies a 21.22x forward Price-to-earnings multiple – significantly lower than the three-year, five-year, and seven-year historical average of 34.84x, 34.97x, and 35.65x, respectively. In the near-to-medium term, we do not see any material factor that would adversely change the P/E multiples of the stock. In our view, we think that the stock is oversold. We estimate a N70.92 fair value for the stock – which represents a 36.84x justified P/E. Therefore, we estimate a 78% total return for the stock. We believe that the stock is currently undervalued at its current market price.

Please follow the link “Nigerian Breweries Plc FY 2022 Earnings Update – Value Still Present Despite Volatile Operating Environment” to view the whole report.

Thank you.

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