Guinness shares gather momentum as Q3 2017 PAT soars by 220% 321%

Guinness Nigeria Plc has shown signs that its 2017 financial year ending in June 31 will record high margin profit as the third quarter result released on Thursday has shown, triggering remarkable equity price growth.

The Diageo Company’s result released by the Nigerian Stock Exchange (NSE) for the period ended 31 March 2017 has triggered upward revision of the company’s projections by analysts as investments surrounding the company’s equity price started looking up.
Cross section of stockbrokers who spoke to Daily Times following release of the company’s result said that trading closed on bids for the company, as more investors strive to take vintage position in the company.

According to the Q3 2017 result, Guinness Nigeria grew its Profit before Tax (PBT) and Profit after tax (PAT) and PAT grew by 220 per cent y/y and 321 per cent y/y respectively, even as sales declined by -37% y/y to N30.4billion.
PBT and PAT peaked at N2.2billion and N2.1bilion, having ballooned by 220% y/y and 321% y/y respectively.

The sales decline and a 42 per cent y/y increase in net finance costs were more than offset by a -34 per cent y/y decline in operating expenses and a +1,093bp y/y gross margin expansion to 54.7 per cent , leading to the growth in PBT.
The result showed that Guinness Nigeria paid a lower tax rate of 4 per cent, against 27 per cent in Q3 2016.

However, on a sequential basis, Q3 sales were down -17 per cent q/q. The PBT and PAT compare with pre-tax and post-tax losses of –N2.5bn and –N2.4bn respectively reported in Q2 2017. Despite the q/q sales decline, a 24% q/q increase in net finance costs and a 25% q/q rise in operating expenses, the company’s bottom line was boosted, compared to the losses reported in the preceding quarter.

Like most consumer goods, Guinness has suffered from unfavourable macroeconomic conditions. The company is still import dependent, it has been reporting weak gross margins in the last few quarters. Surprisingly, Guinness reported a gross margin of 55%, up 3,010 bps q/q and 1,093 bps y/y.
However, experts have said that the extent of the gross margin expansion in Q3 may likely be due to the reclassification of some items between opex and COGS.