International Breweries pre-tax profit falls by 28%

International Breweries Plc has recorded a 28 per cent decline in profit before tax for the year ended March 31, 2015. In a filing with the Nigerian Stock Exchange (NSE), the brewery company posted a profit before tax of N2.815 billion as against N3.925 billion recorded during the comparable period of 2014.

This represented a drop of 28 per cent. Similarly, profit after tax fell from N2.105 billion to N1.946 billion, accounting for a drop of 7.55 per cent. However, the company’s revenue grew to N20.649 billion in 2015 from N18.493 billion, representing an increase of 11.65 per cent. Analysts at FBN Capital had while reacting to the company’s Q3 2015 financials, said that International Breweries’ Q3 2015 (end-Dec) PBT came in well behind their forecast. “As such, we have cut our 2015-17E EPS forecasts by an average of 15 per cent.

The downward revision to our EPS forecasts is mainly driven by a negative surprise on the net interest line in Q3 (-N922m vs. -N119m in Q2). “Despite these cuts, we have revised our price target modestly to N23.9 from N24.4 owing to a 100bp reduction in our WACC to 14.1 per cent. Our lower WACC is driven by a sizable increase in the firm’s financial leverage. With the shares having shed -25 per cent in the last quarter, our price target implies an upside potential of 32.8 per cent from current levels. We have maintained our neutral rating on the stock which is trading on a 2015E P/E multiple of 30.3x for 2016-17E average EPS growth of 13.1 per cent.”