Dear Afrinvestor,

Please find below our Research Note expressing our initial thoughts on the recently released H1 2012 results by Nigerian Breweries Plc.

Nigerian Breweries (NB) recently released its unaudited half year results showing a 23.9% year-on-year growth in Turnover from N110.2bn to N136.5bn. Profit Before Tax (PBT) growth was marginally positive by 1.2% from N28.2bn to N28.5bn, while Profit After Tax (PAT) recorded a similar increase of 2.2% from N19.0bn to N19.4bn. Pre-tax and net margins however recorded year-on year declines of 470bps and 300bps from 25.6% and 17.2% to 20.9% and 14.2% respectively.

These results mirrored our unannualized H1 2012 estimates on top line basis, with a marginal variance of 0.7%; while the brewer’s net earnings performance fell significantly below our forecasts by 15.9% on account of a higher than expected finance expense incurred by the brewer. Despite the slump in profitability margins, we remain impressed with the brewer’s sales performance during the period (with historical Q2 turnover, contributing slightly less than 25.0% to full year numbers).

Based on these results, NB now trades at trailing P/E and P/BV multiples of 23.1x and 12.2x respectively, a slight discount to Guinness’ trailing P/E of 23.5x but a premium to its P/BV of 3.5x. We maintain our NEUTRAL short term rating on the stock.