Meristem Securities’ outlook for Nigerian brewers

Nigeria's brewing industry has recently witnessed a challenging quarter as earnings for major players like Nigerian Brewers, Guinness, and International Brewers have shown a significant decline. Busola Akinyele, Investment Research Analyst at Meristem Securities, shared insights on the Q1 results in a CNBC Africa interview. Nigerian Brewers and Guinness reported a decline in top-line revenue, while International Brewers recorded a modest increase. Guinness attributed its revenue decrease to the halt in production at its Ghana facility, leading to a drop in export sales. Operating expenses rose across the board, impacting bottom-line earnings. Nigerian Brewers saw a 31% decline, Guinness a 67% drop, and International Brewers remained in a loss position. Investors have reevaluated stock valuations, with Guinness trading at unusually low prices. The industry faces ongoing challenges amidst the global pandemic. Akinyele highlighted the supply chain disruptions faced by brewers, from production to distribution. Movement restrictions affected product delivery, forcing companies to innovate and streamline operations. On the demand side, reduced social gatherings and limited events have impacted sales volumes. However, resilient brewers have adapted to the changing landscape, implementing strategies to navigate the evolving market dynamics. With the gradual easing of restrictions, the industry anticipates a slight recovery in economic activities. Despite the current uncertainties, breweries that demonstrate flexibility and efficiency in adapting to new norms are better positioned to weather the storm.