International Breweries Plc (INTBREW) released its unaudited financial results for Q2-23 over the weekend (30 July), disclosing a more significant loss per share of NGN0.79 (compared to a loss per share of NGN0.01 in Q2-22), bringing the H1-23 loss per share to NGN0.88 (versus earnings per share of NGN0.01 in H1-22). The brewer’s performance in the period was negatively impacted by a significant increase in unrealised foreign exchange (FX) loss (+452.5% YoY) and higher net finance costs (+221.6% YoY).
In Q2-23, revenue showed a 14.6% YoY increase, primarily driven by price increases implemented during the year (approximately 12.5%). However, for H1-23, revenue growth slowed to 4.2% YoY due to the impact of a cash crunch experienced in Q1, which negatively affected revenue generation (-5.4% YoY). Nevertheless, revenue increased by 13.5% on a quarter-on-quarter basis, benefiting from the price increases implemented during the period.
Despite the topline expansion, INTBREW’s gross margin contracted slightly by 20 basis points YoY to 23.3% in Q2-23, influenced by higher cost of sales (+14.9% YoY) relative to revenue growth (+14.6% YoY). The higher cost of sales was attributed to increased input and overhead costs, driven by the prevailing highly inflationary environment.
INTBREW reported an operating loss of NGN31.72 billion in Q1-23, contrasting sharply with an operating income of NGN1.71 billion in Q2-22. The loss was mainly due to a substantial increase in other expenses, totaling NGN33.31 billion, primarily stemming from a significant unrealised foreign exchange loss of NGN41.89 billion (+452.5% YoY).
Furthermore, net finance costs surged by 221.6% YoY to NGN5.60 billion in Q2-23 (compared to NGN1.74 billion in Q2-22), driven by a significant rise in finance costs (+253.3% YoY). The higher finance cost resulted from increased interest expenses on loans, which escalated by 343.5% YoY. The brewer’s loans and borrowings grew by 85.9% YoY to NGN360.76 billion in H1-23, contributing to the higher finance costs incurred during the period.
Consequently, INTBREW posted a pre-tax loss of NGN37.32 billion (versus a pre-tax loss of NGN32.07 million in Q2-22). Following an income tax credit of NGN16.03 billion in the period, the loss after tax settled at NGN21.29 billion in Q2-23 (compared to a loss after tax of NGN384.97 million in Q2-22).
Commenting on INTBREW’s performance, analysts noted the ongoing struggle of the brewer to achieve positive earnings since Q1-22, facing cost pressures due to the devaluation of the naira and higher finance costs. While the company’s revenue is expected to benefit from better cost-reflective prices and increased volume growth, the short-term outlook remains unimpressive. Earnings are likely to remain dampened by the challenging operating environment, particularly with the devaluation of the naira. As a result, analysts are closely reviewing their estimates to assess the brewer’s prospects in light of these market conditions.
