17th February, 2012
Guinness Nigeria Plc has declared a profit after tax of N7.147 billion for the half year (H1) ended December 31, 2011, showing a marginal decline of 2.5 per cent compared with N7.339 billion recorded in the corresponding period of 2010.
Unaudited results of the company made available by the Nigerian Stock Exchange (NSE) showed that the company H1 of 2011 was N62.542 billion, up from N59 billion in H1 of 2010.
Apart from the decline in profit after tax, the brewer’s net margins fell from 12.4 per cent in H1 2010 to 11.4 per cent in 2011.
Commenting on the results, analysts at Afrinvest (West Africa) Limited, said that despite the modest growth in turnover, the brewer’s top line revenues came in 13.3 per cent below their estimate.
“Profit before tax and profit after tax also fell short of our expectations by 20.5 per cent. These results suggest that Guinness has not been able to compete effectively in the ‘lager beer’ space, especially in the low priced segment. As such, it continues to record a decline in Earnings Before Interest, Taxes, Depreciation and Amortisation (EBITDA) margin despite the year-on-year increase in its gross margin,” they said.
According to them, Guinness’ recent play in sports relationship marketing might have driven a larger part of the 20.3 per cent increase in marketing and distribution expense, albeit with insignificant impact on revenues in the short term.
“Based on these results, Guinness trades at a trailing price earnings ratio of 18.3x. We maintain our reduced rating on Guinness, with a six -month target price of N210.02, representing a 4.7 per cent downside from the current market price of N220.30.
“We, however, remain optimistic on the long-term prospects of the brewer, premised on Nigeria’s huge beer market potential and the opportunities for growth in the high end non-lager market segment, even as the brewer ramps up recent capacity additions in its plants,” they said.