NB: Heineken, Distilled Trading, Stanbic Nominees Take 66% of Dividend Harvest
Nigeria Breweries (NB) Plc. strengthened its bottom line in 2021, according to its latest regulatory filling as profit after tax inched up 72% year on year. Its profit distribution also inched higher, as the dividend aristocrat maintains payment culture.
With the result, the leading brewer company edged ahead, leaving the pandemic pressures on its sales and profitability behind while consolidating on its market position. Nigerian Breweries controls about 60% of the market share, according to analysts notes.
In the audited statement, Board of Directors revealed the decision to pay out 2021 earnings to shareholders after strong earnings beat following the pandemic-induced economic pressures that sentenced the company to its lows in the financial year 2020.
Its audited result published on the Nigerian Exchange shows a 12 years track record of paying dividends – without break despite a tough operating environment. In the stock market, its share price closed at N48 on Friday.
Based on right to profit-sharing, the large chunk of the Nigerian Breweries dividend payout goes to Heineken B.V, its largest shareholder.
Analysis of the company documents shows that are three key shareholders that own 65.57% of Nigerian Breweries in 2021, led by Heineken Brouwerijen B.V. 38.07%, Distilled Trading International B.V 15.53% and Stanbic Nominees Nigeria Limited 11.97%, according to member register.
Earnings Performance
The company’s audited financial statement shows that the brewer bolstered profit by 72% in the financial year 2021 to N12.672 billion, from N7.368 billion in the pandemic year 2020.
Though the growth looks like a recovery from the downturn, the board of directors at Nigerian Breweries however proposed to payout N12.92 billion to shareholders.
After the earning surprise, the company’s share price inched higher to N48, up 50 kobo from N4.75 on 8.075 billion outstanding as market valuation printed at N387.639 billion.
In the period, the company’s sales rose 29.7% N437.285 billion in 12-month, coming from a weaker turnover of N337.046 billion in the comparable period in 2020.
Recall that Covid-19 restriction had impacted the brewer’s operation and the bottom line had dipped due to lower sales in the period.
In the same period, the company’s sales cost inched up by 26.8% in line with increased activities or volume production to N276.872 billion, from N218.355 billion last year amidst steep headline inflation and weak naira for imports.
However, sales growth clouded increased production costs in the period, thus the brewer’s margin was strengthened. NB Plc.’s gross profit expanded more than 35% year on year, printed at N160.413 billion at the end of the financial year 2021, from N118.691 billion in the previous year.
In the period, the audited result shows that there was moderation in net finance cost, down 1.3% year on year. Thus, Nigerian Breweries pretax profit inched up significantly to N23.710 billion, from up more than 104% from N11.577 billion in the comparable period.
Dividend Aristocrat
The brewer declared a total dividend of N12.92 billion for the financial year ended Dec. 31, 2021, against its N7.51 billion achieved in the corresponding period of 2020, an increase of 72. 03 per cent.
The total dividend comprises an interim dividend of N3,230,332,760 at 40 Kobo per share, which was declared in October 2021, and a final dividend of N9,690,998,280, totalling 120 Kobo per share.
This translates to a total of 160 Kobo per ordinary share of 50 Kobo each, the management said in its audited result submitted to the regulator.
The group stated that if the proposed final dividend of N9,690,998,280 or 120 Kobo per share is approved, it would be subjected to deduction of withholding tax at the appropriate rates.
It revealed that the final dividend would become payable on April 22, 2022, to shareholders whose names appeared on the company’s register of members at the close of business on March 9, 2022.
In the last 12 years, the brewer has not missed dividend payments irrespective of the operational condition and profitability performance.
Riding between high operating cost and demand pressure, performance among alcoholic drinks makers have been tepid – far behind the pre-pandemic period as the battle for consumers wallets get dirty.
Following the outbreak of the pandemic in 2020 that dragged the Nigerian economy, most brewers reported unimpressive earnings outturns, their separate year-end results shown.
In an industry report, Afrinvest said the resilience of players in the Nigerian brewery industry was further tested in 2020 as the spill-over effect of the pandemic amplified the impacts of structural challenges besetting the industry’s operating environment.
The firm noted in the report that before 2014, the major talking point on the industry’s operating environment was the increased attraction of global players such as Heineken and SAB-Miller, due to years of strong industry profitability performance.
For instance, between 2006 and 2014, the industry’s gross and earnings before interest tax depreciation and amortisation (EBITDA) margins averaged 47.0% and 26.0% respectively, the report stated.
This was made possible by the impressive performance of the broader economy, as annual real GDP growth averaged 6.4% over this period, while the exchange rate was ₦141.35/$1.00) with the inflation reading of 10.1% and the lower unemployment rates at 12.1%, that supported strong purchasing power of consumers.
However, this trend began to reverse in 2015 when the global crude oil price shock exposed Nigeria’s years of economic mismanagement and external vulnerability.
By the end of 2019, the real GDP, the exchange rate, the inflation, and the unemployment rates have deteriorated to 2.2%, ₦306.00/$1.00, 11.4% and 21.3% respectively, according to analysts report.
Furthermore, the industry’s gross margin and EBITDA margin (ex. INTBREW) fell to 33.5% and 11.6% respectively, due jointly to weak growth in consumer demand and accelerated increase of cost lines.
In 2020, analysts said the brewing industry witnessed a rebalancing of market share controlled by the three industry leaders – NB, GUINNESS, and INTBREW, with a combined 98.9% share of industry revenue.
Despite the impact of the pandemic and the limited scope for a price adjustment to capture recent cost pressures, NB and INTBREW grew market share by 3.1% and 1.1% to 57.7% and 23.4% respectively, while GUINNESS lost 4.3%.
Consequently, NB’s market share crossed 55.0% for the first time since 2017, while INTBREW’s clearly established itself as the second biggest player ahead of GUINNESS.
Afrinvest report also noticed that unlike in the previous three years where each of the brewers rolled out a new product or developed a variant of an existing brand, only NB expanded its portfolio in 2020 to meet shifting consumer preference and boost market penetration.
Nevertheless, the industry’s profitability declined further in 2020 relative to the prior year. Just as things are getting better in the economy, NB appears to have edged ahead of pandemic induced earnings break. #NB: Heineken, Distilled Trading, Stanbic Nominees Take 66% of Dividend Harvest
