December 12, (THEWILL) – Nigerian Breweries Plc posted a huge decline of N852 million in its Group profit after tax (PAT) for the third quarter (Q3) of 2021. This represents a 63 percent drop from N1.35 billion recorded in the corresponding Q3 (Quarter-to-Date) of 2020 to N498 million in the Q3 (Qurter-to-Date) review period – all at Group level. To some extent, the company’s nine-month performance as of September 2021 seems to strike a reversal chord from the sharp fall of 2020 to a quantum leap in the current financial year. But the Q3 PAT plunge has reconfigured the platform for positive prospects.
Notwithstanding the relatively impressive nine-month (cumulative) performance, which offers grounds for a good dividend outlook for the year, the plunge in Q3 profit is set to alter investors’ prospects in this regard. They may therefore have to wait for another full year, at least, before the growth trajectory truncated by the 2020 COVID-19 year, is restored.
A look at the five-year report of the firm shows that 2020 marked three years of sustained drop in profit for the 75-year-old multinational brewing giant. The firm’s PAT dropped from N33 billion in 2017 to N19.4 billion in 2018 representing 41.3 percent; it thereafter tumbled further to N16.1 billion in 2019 before pulverizing to N7.5 billion in 2020.
While the plunge to N7.52 billion in 2020 can be traced to the COVID-19 pandemic, the declining trend before then, after 2017 when PAT rose to N33 billion from N28.39 billion, was a source of worry to investors amid the difficult operating environment.
With post-COVID-19 recovery setting the pace in corporate activities, investors were anxious to see resumption of positive return-on-investment, hence the concern that the disruption in Q3 profit performance created. Moreover, analysts had predicted mixed fortunes based on the firm’s H1 report, indicating that the dividend prospect for the year would be positive amid a return to growth trajectory.
“Although NB’s top-line performance reflects the firm’s recovery to pre-pandemic levels, we are not entirely optimistic about its bottom-line growth given the tepid economic recovery of the operating environment — FX illiquidity, high inflationary pressures, higher inputs costs amid further currency devaluation are likely to persist throughout 2021. Furthermore, consumers’ price sensitivity poses a downside risk to the brewer’s business.
“On the flip side, we are impressed with the growth in earnings delivered by Nigerian Breweries, and we believe the company is best-positioned amongst its peers […]