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Champion Breweries PAT rises by 142% to N1.076bn in H1 2022

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Champion Breweries Plc has reported its Unaudited Financial Results for the half year (H1), ended June 30, 2022, with a profit after tax (PAT) of N1.076 billion in half year H1 2022 compared to N445.23 in half year H1 2021 representing 141.60 per cent growth year-on-year.

Curiously, despite the impressive rise in earnings, the company’s net profit margin in recent periods hovers around 15 per cent on average. In fact, in 2020 financial year, it was as low as 2.25 per cent, but stood at 15.66 per cent in H1 2022, representing a growth of 71 per cent year-on year.

Net profit margin measures the profitability of a company and a good net margin varies by industry, but a margin of 10 per cent is considered average, while 20 per cent and above is considered high or good.

Comparatively, Champion Brew’s net margin is better than other key peers in the industry. For instance, in Q1 2022 financial year, Champion Brew’s net profit margin stood at 16.69 per cent compared to Guinness’s 2.90 per cent and Nigeria Breweries’ 0.78 per cent

A cursory view at the financials shows that higher growth in cost of sales has been a major factor affecting the company’s bottom line. For instance, in H1 2022, revenue rose by 42 per cent year-on year-on-year to N6.862 billion, while costs of sales rose by 46 per cent to N4.209 billion, broadly due to increased cost of raw materials, which is a major component of the company’s cost of sales. Cost of sales constituted 76 per cent of total expense, while raw materials and consumable constituted 49 per cent of cost of sales.On the company’s balance sheet, total assets grew marginally by 6 per cent year-to-date to N14.185 billion in H1 2022 compared to N13.487 billion in Financial year 2021. The low growth was caused by a dip in cash and cash equivalent, inventories and trade and other receivables notwithstanding the high growth in prepayment (99 per cent).

Net Operating Income stood at N1.512 billion in H1 2022, compared to N661. 3 million in H1 2021 (129 per cent growth year-on-year)

Operating expenses was N5.454 billion in H1 2022, compared to N4.223 billion in H1  2021 (29 per cent growth year-on-year)

Total Liabilities stood at N3.326 billion, compared to N4.267 billion as at December 2021 (8.84 per cent year-to-date growth).

Shareholders Fund was N10.294 billion, a 12 per cent year-to-date increase relative to December 2021’s value at N9.220 billion.

Champion Breweries Plc operates in the NGX consumer goods sector and has been listed on the NGX since September 1, 1983. The company is currently the 40th most valuable stock on the NGX with a market capitalization of N31.3 billion, which makes about 0.115 per cent of the Nigeria Stock Exchange equity market.

In terms of capital gain, Champion Breweries has gained 70.2 per cent Year-to-Date. It started the year with a share price of N2.35 and closed its last trading on August 3, 2022, at N4 per share.

In terms of trading liquidity/volume, Champion is the 46th most traded stock on the NGX over the past three months; from May 4 to August 3, 2022. Within this period it traded a total volume of 75.9 million shares and YtD trading volume of 136,572,349 million (daily average volume of 955,051 shares). This average daily volume is good and may indicate that the stock is competitive. Also between July 29 and August 2, 2022, the stock has traded above the daily average volume; an indication of a price climax. So investors should be cautious because sharp price moves coupled with steep volume increases can often be a sign of imminent price reversal.

Also with a low free float, trading can be risky. Champion Breweries Plc as at June 30, 2022, has a free float percentage and value of 3.58 per cent N104,769,443.86 respectively. Champion Breweries Plc as at June 30, 2022, has 7,829,496,464 outstanding shares; 96.41 per cent of the outstanding shares are owned by Raysun Nigeria Limited (86.36 per cent) and Akwa Ibom Investment (10.06 per cent). This is not compliant with the NGX’s free float requirements for companies listed on the Main Board.

The NGX Rule Book; Rule 12:1 (4) (a) requires a minimum free float of twenty per cent (20 per cent) of companies’ issued share capital; or (b) The value of its free float is equal to or above N40 billion on the date the Exchange receives the Issuer’s application to list. Free float, means the number of shares outstanding and available to be traded on a securities exchange.

Notwithstanding, the company has shown consistent growth in revenue and earnings at least in recent periods. Over the past one year, earnings grew by 142 per cent

The company’s earnings per share grew by 142 per cent to N0.14 from N0.06 in H1 2021. EPS is a good measure of a company’s profitability; it indicates how much money a company makes for each of its shares. Investors should note that they do not have access to the EPS; a portion of it may be distributed as dividend or a portion of it or all can be retained for expansion and growth and comparing EPS in absolute terms may not have much meaning to investors. But it is, when compared to share price, it helps determine the value of earnings and how investors feel about future growth. This gives rise to the price-to-earnings ratio and with the company’s price-to-earnings ratio (19.4x) compared to the peer average (17.3x), the stock is priced higher and so expensive.

compliant with the NGX’s free float requirements for companies listed on the Main Board.

The NGX Rule Book; Rule 12:1 (4) (a) requires a minimum free float of twenty per cent (20 per cent) of companies’ issued share capital; or (b) The value of its free float is equal to or above N40 billion on the date the Exchange receives the Issuer’s application to list. Free float, means the number of shares outstanding and available to be traded on a securities exchange.

Notwithstanding, the company has shown consistent growth in revenue and earnings at least in recent periods. Over the past one year, earnings grew by 142 per cent

The company’s earnings per share grew by 142 per cent to N0.14 from N0.06 in H1 2021. EPS is a good measure of a company’s profitability; it indicates how much money a company makes for each of its shares. Investors should note that they do not have access to the EPS; a portion of it may be distributed as dividend or a portion of it or all can be retained for expansion and growth and comparing EPS in absolute terms may not have much meaning to investors. But it is, when compared to share price, it helps determine the value of earnings and how investors feel about future growth. This gives rise to the price-to-earnings ratio and with the company’s price-to-earnings ratio (19.4x) compared to the peer average (17.3x), the stock is priced higher and so expensive.

With continued inflationary pressures and hike in interest rate, which are likely to impact on the cost of production and consumer demand, the company’s top and bottom lines are likely to be affected, thus may contract future margins and growth.

“The performance of the Company is subject to seasonal fluctuations as a result of weather conditions and festivities. The Company’s full-year results and volumes are dependent on the performance in the peak-selling season, typically resulting in higher revenue and profitability in the last quarter of the year. The impact from this seasonality is also noticeable in several working capital-related items such as inventory, trade receivables and payables,” says the company.

SWOOTs market capitalization up by N42 bn w-o-w

The combined market capitalization of stocks worth over one trillion (SWOOTs) appreciated by 0.21 per cent to close at N20.05 trillion from N20.01 trillion the previous week, reflecting a growth of N42.15 billion. Stocks included in this classification are AIRTELAFRICA, BUA CEMENT, DANGOTE CEMENT, NESTLE and MTNN Plc.

MTNN Plc’s share price closed at N214.9 at the end of the week’s trading sessions to reflect a growth of 7.40 per cent week on week. This means that the total amount gained by investors was N301 billion, causing a rise in the company’s market capitalisation.

The communications company, a competitor of Airtel Nig Plc, has a total market capitalization of N4.37 trillion, N2.79 trillion lower than Airtel Africa’s current market value.MTNN Plc is the third-highest in market value on the Nigerian Exchange Limited (NGX). The company released its H1 2022 financial result, reflecting a 20.07 per cent growth in revenue for the period, while profit after tax grew significantly by 28.06 per cent from N141.82 billion in H1 2021 to N181.62 billion in the current period.

Nestle Nigeria Plc’s share was up by 2.99  per cent to close the week at N1,300 per share, amidst sell-offs and buy-interests during the trading week. The Fast-Moving Consumer Goods company currently has a market capitalization of N1 trillion.Nestle Nigeria Plc is now the only company under the NGX Consumer goods Index to be worth over a trillion, following the exit of BUA Foods from the SWOOTs category.

The H1 2022 financial result revealed a profit of N27.7 billion, representing a 28 per cent increase from the prior-year period, as revenue grew by 30 per cent from N171 billion to N222 billion. Earnings per share for the period was at N12.33.

BUA Cement Plc’s share price close the week flat at N58.8, a 15.15 decline from N69.3 last week while the market capitalization stood at N1.99 billion, from N2.35 billion the previous week.The company’s H1 2022 financial report revealed revenue of N188.56 billion, reflecting a growth of 51.72 per cent from N124.28 billion in 2021. Similarly, profit after tax increased by N17.97 billion, reflecting a 41 per cent increase from N43.40 billion recorded in the corresponding period of 2021, to N61.36 billion in the current period

Airtel Africa Plc’s share price remained unchanged during the week to stand at N1905.4 per share at the end of the trading week, with a market capitalization of N7.16 trillion.As the most capitalized company on the exchange once again, it led the SWOOTs strongly, with MTNN, its competitor as second-most capitalized stock, far behind.

The telecom giant released its Unaudited Financial Statement for the quarter ended June 2022 revealing a 13 per cent growth in revenue from $1.11 billion in 2021 to $1.26 billion in the current period.The profit after tax for the period also appreciated significantly by 25.3 per cent from $142 million in 2020 to $178 million.

Dangote Cement Plc’s share retained its share price at N265.00 as it traded flat during the week. The company, which is a competitor of Bua Cement Plc and Wapco Plc, and the most capitalized cement producer on the NGX, has a total Market capitalization of N4.51 trillion.Dangote Cement Plc is the third most-valued company quoted on the exchange and makes up roughly 22 per cent of the total market capitalization of all stocks worth over one trillion.

The H1 2022 financial result revealed a profit of N172.10 billion, representing a 33.83 per cent increase Y-o-Y. Meanwhile, Revenue for the period stood at N808.04 billion, a 17.01 per cent increase from the corresponding period of 2021.

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Stock market extends loss, index drops further by 0.53%

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The Nigerian stock market on Monday extended its losing streak by 0.53 percent due to losses in Tier-One banking stocks.

Specifically, the market capitalisation, which opened at N57.864 trillion, shed N304 billion or 0.53 percent to close at N57.560 trillion.

Similarly, All-Share Index fell by 0.53 percent or 537.44 points to settle at 101,777.12, compared to 102,314.56 posted on Friday.

As a result, the Year-To-Date (YTD) return slipped to 36.11 percent.

Losses in Tier-one banking stocks such as Guaranty Trust Holding Company (GTCO), FBN Holdings, Zenith Bank, Access Corporation, Jaiz Bank, as well as Transnational Corporation, among other decliners, drove the market to a negative terrain.

Also, market breadth closed negative with 32 gainers and losers.

On the losers’ log, Fidelity Bank led by N1, to close at N9.

Jaiz Bank followed by 22k to close at N2.05 and RT Briscoe dropped 5k to close at 54k per share.

Also, GTCO lost N3.20 to close at N38.20, while Universal Insurance trailed by 3k to close at 36k per share.

On the flip side, UPDC Real Estate Investment Trust led the gainers’ chat by 13k to close at N1.43.

Morison Industries Plc followed with a gain of 25k to close at N2.81 per share.

NEM Insurance advanced by 85k to close at N10.40, while Daar Communications rose by 5k to close at 70k.

Oando Plc added 85k to close at N13.40 per share.

Analysis of the market activities indicated trade turnover settled lower relative to the previous session.

A total of 326.64 million shares valued at N7.17 billion were exchanged in 10,777 deals, as against 734.04 million shares valued at N21.59 billion in 12,491 deals on Friday.

On the activity table, United Bank of Africa (UBA) led in volume with 42.25 million shares traded in value of  N1.11 billion, Transcorp followed with 27.56 million shares worth N396.17 million.

Access Corporation sold 24.62 million shares valued at N465.81 million, Ondo traded 22.66 million shares worth N307.71 million and Fidelity Bank transacted 17.13 million shares worth N161.26 million.

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SEC, Capital Market Community to address challenges in the sector

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By Matthew Denis

The Securities and Exchange Commission (SEC) has disclosed that the Capital Market Committee (CMC) for the first quarter of 2024 is scheduled to be held virtually on Thursday, 18TH April 2024 to discuss challenges, brainstorm ideas and make informed decisions about the progress of the Nigerian capital market.

Critical issues about the capital market will be extensively dealt with at the meeting, the SEC stated.

According to the SEC, there will be a presentation of updates on major achievements from the various technical Committees such as Commodities Ecosystem Implementation Committee, E-Dividend and DCS, Financial Literacy and Non-interest Capital Market FLTC and many others driving the implementation processes of the Capital Market Master Plan.

CMC is an industry-wide committee comprising the SEC, representatives of capital market operators and trade groups, and other stakeholders.  The committee is a forum where stakeholders come together to engage in insightful discussions concerning the critical factors that impact the growth and organised functioning of the capital market, address the foremost concerns influencing the capital market, and work together to shape its future.

It was primarily established to serve as a medium for the exchange of ideas among market stakeholders as well as an avenue for providing feedback to the SEC on how to continuously address challenges, improve market operations, and enhance the regulatory framework.

Expected participants at the CMC meeting include Chief Executive Officers (CEOs) of all registered capital market firms (i.e. Broker/Dealers, Investment Advisers, Custodians, Fund/Portfolio Managers, Receiving Banks, Issuing Houses, Rating Agencies, Registrars, Reporting Accountants, Trustees, and Capital Market Consultants, etc.).

Others are Chief Executive Officers of Nigerian Exchange Group (NGX), National Association of Securities Dealers (NASD); FMDQ Group Plc; Africa Exchange Holdings (AFEX); Nigeria Commodity Exchange (NCX); Central Securities Clearing System (CSCS); as well as representatives of relevant financial sector regulatory agencies, among others.

The usual interface with members of the Press will be held the following day Friday, 19th April 2024 through a Webinar.

Attendance at both events is strictly by invitation. All invited participants are expected to be seated by 9:45 am.

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BUA Foods Plc: Revenue rises 74.36%, as operating costs escalate in FY 2023

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The performance of Nigeria’s consumer goods companies in 2023 showed increasing divergence in performance and profitability positions as the effect of challenging macroeconomic conditions continued to impact operational costs and profitability positions of consumer goods industry players.

Despite these challenges, BUA Foods Plc demonstrated remarkable resilience, mirroring its strategy, and delivering double-digit growth.

The spectre of inflation loomed as businesses raised prices to cover surging input, operational, and finance costs. currency devaluation, escalating energy expenses, and heightened insecurity also remained elevated in 2023.

Households grappled with dwindling disposable incomes, eroding their purchasing power, and altering consumption patterns compared to preceding years.

The impact of this economic strain was acutely felt by lower-income households, while even those of average means found themselves grappling with the pervasive effects of rising inflation and challenging macroeconomic conditions.

In an outlook statement for 2023 and while delivering the FY 2022 financial report of BUA Foods Plc, Ayodele Abioye, the managing director of BUA Foods Plc, stated that “we remain resolute to navigate the numerous business headwinds to continue delivering double-digit growth with a sustained focus on our market expansion strategy across our business segments.”

This unwavering focus on strategy is what sets BUA Foods Plc apart, leading to its highest sector market capitalisation at N6.84 trillion and its position as one of the most profitable FMCG companies listed on the Nigerian Exchange Limited (NGX).

Revenue and Profitability

BUA Foods Plc’s revenue continued its upward trend, as seen in the past four years. The company’s revenue grew by +74.36 percent to N729.44bn in FY 2023 from N418.35bn in FY 2022. Major contributors to the FY 2023 revenue were the sale of sugar (Fortified), flour and pasta, contributing 86 percent of the FY 2023 revenue. Despite +75.60 percent growth in operating profits to N206.32bn in FY 2023 from N117.49bn, growth in selling and distribution expenses and finance cost by +110.36 percent and +1,054.59 percent to N29.85bn and N100.68bn respectively had a major impact in squeezing pretax returns which grew only by +0.83 percent to N108.12bn FY 2023

Segmental Performance

In 2023, sugar (fortified) emerged as the primary driver of revenue growth for BUA Foods, closely followed by bakery flour and sugar (non-fortified). Molasses, the byproduct of the sugar refining process, made the smallest contribution to revenue.

Despite its significant growth, the wheat bran segment ranked fourth in revenue contribution. Nevertheless, the wheat bran segment holds promise within BUA Foods’ vertical integration strategy and segmental growth initiatives, showing notable potential for future revenue growth

Financial Position

The company’s assets rose by +76.28 percent in FY 2023 to N1,070.44bn from N607.22bn in FY 2022. Asset growth in FY 2023 is attributable to inventory growth, cash and cash equivalents, and, due from related parties, growth by +277.27 percent, +211.30 percent, and +265.60 percent, respectively. BUA Food’s Liability increased by +114.84%, driven by a +207.59 percent growth in total borrowings.

Shareholders’ equity capital climbed by +13.46 percent as growth in returns saw retained earnings grow by +13.95 percent in FY 2023 to N262.06bn from N230.96bn in FY 2022.

Cash Flow

BUA Food Plc’s cash position rose by +259.75 percent as cash and cash equivalents increased to N99.55bn in FY 2023 from N27.67bn, supported by a +212.06 percent growth in current borrowings.

Cash generated from selling the companies’ products and services increased as cash from operating activities rose by +21.72 percent from N124.47bn in FY 2022 to N151.51bn in FY 2023. Net cash received from investment activities grew to N34.59bn in FY 2023 from N15.44bn in a corresponding period in 2022.

Ratios

The fiscal year 2023 witnessed notable enhancements in BUA Foods Plc’s capability to fulfil its short-term obligations, as evidenced by improvements in the current and acid test ratios.

Specifically, these ratios advanced to 0.91 and 1.41, respectively, from 0.90 and 0.81 in the previous fiscal year.

However, the company experienced increased operational and financial costs, leading to a decline in the return on equity (ROE) by -4.57bps to 10.47 percent in FY 2023 from 15.04 percent in 2022. Similarly, the return on assets (ROA) observed only a marginal increase of +3.23bps in FY 2023, reaching 42.78 percent compared to 39.55 percent in 2022.

While the gross profit margin (GPM) expanded to 35.71 percent in FY 2023, reduced net earnings during the same period resulted in a decline of -6.47bps in the net profit margin (NPM) to 15.37 percent, down from 21.83 percent in the corresponding period in 2022.

Notably, BUA Foods Plc experienced a decrease in inventory turnover in FY 2023, with inventory growing to N112.28bn from N29.76bn in 2022. This inventory growth could have contributed to higher storage and holding costs for the FMCG industry leader.

Conclusion

Nigeria’s FMCG sector has been pressured by rising operating costs, growing inventories (probably because of lower demand), and steeper debt. The combination of these factors has doused investor enthusiasm. This does not imply that investors are largely pulling away from the sector, but they are looking closer at how economic fundamentals will affect the sector’s future earnings. Several suppliers have bitten the dust as rising costs and increased insecurity from farm gates to factory floors have squashed profit margins. Insecurity has led to a large pullback in miller suppliers, raising the cost of flour products and exported goods.

A sustained rise in the foreign exchange rate in 2023 led to FMCGs’ foreign exchange losses and put pressure on their costs of goods sold (COGS). Analysts expect the situation to be less severe in 2024 as the naira strengthens against other global currencies.

However, for FMCGs to reduce inventories and lower their prices to encourage higher domestic demand, the domestic security situation must improve, and multiple logistics levies must be tackled.

According to a manager at one of the companies who requested anonymity, ‘with energy costs going up (the federal government has approved a 200% increase in energy tariff for band A power sector consumers), FMCGs will see further operating cost pressures on their bottom lines. Profit margins may be squashed like pancakes.’

He further observed that ‘FMCGs will have to pull out all the stops to get several costs down. BUA has some temporary tax shields from its pioneer status for its pasta and flour milling plants, but the reliefs have started ticking down from last year; the truth is that depending on temporary reliefs for a strategic plan is like swimming in the ocean until the tide runs out, then we will know whose swimming shorts are dangling around their ankles.’

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