Nigerian Breweries Plc. Final Rating Review Report · 6 2017 Corporate Rating Review Report Nigerian Breweries Plc FINANCIAL CONDITION ANALYSTS’ COMMENTS PROFITABILITY Nigerian

Nigerian Breweries Plc.

Final Rating Review Report

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2017 Corporate Rating Review Report

Nigerian Breweries Plc

Rating Assigned:

Aa

This is a company that possesses very strong financial condition

and very strong capacity to meet local currency obligations as and

when they fall due.

Outlook: Stable

Issue Date: June 2017

Expiry Date: 30 June 2018

Previous Rating: Aa

Industry: Brewery

Outline Page

Rationale 1

Company Profile 4

Financial Condition 6

Ownership, Mgt & Staff 10

Outlook 12

Financial Summary 13

Rating Definition 16

Analysts:

Olusegun Owadokun, CFA [email protected]

Isaac Babatunde [email protected]

Agusto & Co. Limited

UBA House (5th Floor)

57, Marina

Lagos

Nigeria

www.agusto.com

RATING RATIONALE

Agusto & Co. hereby affirms Nigerian Breweries Plc’s (“Nigerian

Breweries”, “NB” or “the Company”) rating of “Aa”. The rating affirmation

is justified by the Company’s good cash flow, low leverage, good

profitability and adequate working capital. The rating is equally

underscored by NB’s strong leadership position in the Nigerian Brewery

Industry, stable & diversified Board of Directors as well as highly

qualified and experienced management team. The Company also enjoys

strong parental support of its principal shareholder, Heineken N.V Group

of the Netherlands, which is one of the largest brewing companies in the

world.

In spite of the economic slowdown witnessed during the financial year

ended 31 December 2016, Nigerian Breweries grew its turnover by 6.8%

year-on-year to ₦313.7 billion, reinforcing the Company’s capacity to

withstand macroeconomic shocks and to continue to sustain its market

leadership position in the Industry. Although NB’s profit before tax (PBT)

margin has been on the decline in the last three years due to the

increasing operating costs, the Company’s 2016 PBT margin of 12.6% is

still within our threshold. In addition, Nigerian Breweries’ cash flow has

remained strong with indicators such as operating cash flow as a

percentage of sales (23%) and operating profit margin (17%) surpassing

our expectations. The Company’s financial leverage remains low with

interest cover standing at 18 times for the year ended 31 December

2016.

In the three months ended 31 March 2017 (Q1’2017), NB’s turnover rose

by 17.7% year-on-year (yoy) to ₦91.3 billion, buoyed by increases in

prices of its products in Q4 2016. NB’s PBT margin of 19.1% in Q1 2017

remained at par yoy on account of management’s deliberate policy to

rein in operating & finance costs as well as relative foreign exchange

2 2017 Corporate Rating Review Report


stability. Agusto & Co expects the Company’s performance to be

sustained in the full year 2017, as the economy continues on its recovery

trajectory.

Based on the aforementioned, we have attached a stable outlook to


Rating Drivers

Positive Rating Triggers Negative Rating Triggers

Strong economic recovery: A

virile economic recovery with

its attendant effects on such

macroeconomic indicators as

employment, inflation and

exchange rate will impact

positively on the rating of


Escalating operational costs:

A continual rise in

operational costs will impact

negatively on the Company’s

rating.

Financing structure: A redress

of the long-term funding

mismatch will also impact

positively on the Company’s

rating

Competition: The heightened

competition in the Industry

could erode the Company’s

market share.



Figure 1: Strengths, Weakness and Challenges

•Strong demand for products.

•Diversified product offering

•Strong parent company

•Qualified and experienced management team.

•Market leadership

•Good profitability

•Strong Cash flow

•Low leverage

Strengths

•Long-term funding mismatch

Weakness

•Poor state of infrastructure in the country

•Naira devaluation which has negatively impacted input costs

•Increasing competition

•Declining consumer disposable income

Challenges



PROFILE OF NIGERIAN BREWERIES PLC Incorporated in November 1946 as a limited liability Company, Nigerian Breweries became a public limited

liability company and was listed on the Nigerian Stock Exchange (NSE) in 1973. Since its listing, the

Company has grown by leaps and bounds to become the second largest capitalised stocks on the NSE with a

market capitalisation of about ₦1.2 trillion as at 31 May 2017. Through its subsidiaries (Heineken

Brouwerijen B.V., Distilled Trading International B.V. and Heineken International B.V), Heineken N.V Group of

the Netherlands holds majority shareholding of 55.37%, while 44.63% is held by private individuals and

other institutional investors. The Heineken N.V. group is the world’s third largest beer manufacturer by

volume with operations in more than 70 countries, producing notable international brands such as Heineken.

From inception in June 1949, when the first bottle of Star lager beer was produced at the first brewery

established in Lagos, the Company has grown rapidly across the country through both organic and inorganic

means. The premier Lagos brewery has undergone several optimization processes and is currently one of the

most modern brewing houses in Nigeria. Ama Brewery, which was commissioned in 2003 in Enugu State,

remains the biggest and most modern brewery in Nigeria. Following the conclusion of the merger between

the Company and Consolidated Breweries Plc in 2014, three breweries (located in Imagbon, Awo-Omamma

and Makurdi) were added to the fold. Currently, NB has eleven breweries and two malting plants spread

across the country, which collectively produce the Company’s range of high quality products.

Nigerian Breweries Plc has a rich portfolio of high quality alcoholic and non-alcoholic products which cut

across the premium, mainstream and value brands. The Company has a range of household brands which

cater to the needs of different segments of the market including Heineken, Star, Gulder, “33” Export lager

beer, Goldberg, Legend Extra Stout, Maltina, Amstel Malt, Hi-malt, Strong Bow, Star Radler and Star Lite

among others. Most of the brands are undisputed market leaders in their segmented markets. While Nigeria

remains the dominant market for these brands, some of the products are exported to countries such as the

United Kingdom, the Netherlands, United States of America, other parts of Africa as well as part of the Middle

East and Asia.

In order to ensure efficient and seamless distribution of its products, Nigerian Breweries has sales offices and

depots spread across the country and this is complemented by an extensive network of key distributors,

wholesalers, bulk breakers and retail stores scattered nationwide. Nigerian Breweries remains the market

leader, controlling about two thirds of the lager market in the country. Other major Industry players are

Guinness Nigeria Plc and SAB-Miller.

Nigerian Breweries’ corporate head office is located at Iganmu House, 1 Abebe Village Road, Iganmu, Lagos.

NB has a sixteen-member Board of Directors comprising seven Executive Directors and nine Non-Executive

Directors. The Board is led by Chief Kolawole B. Jamodu (CFR) as Chairman. Mr. Nicolaas A. Vervelde, who has

been the Managing Director/CEO since August 2010, has notified the Board of his resignation effective 16



June 2017 to take up a new assignment within the Heineken Group outside Nigeria. The Board has approved

the appointment of Mr. Johan A. Doyer as the Company’s new Managing Director/CEO on an interim basis

pending the appointment of a substantive MD/CEO. There were no other changes to the Board during the

year under review.

Table 1: Current Directors

Chief Kolawole B. Jamodu (CFR) Chairman

Mr. Nicolaas A. Vervelde Managing Director/CEO (Outgoing)

Mr. Johan A. Doyer Interim Managing Director/CEO (effective 16 June 2017)

Mr. Mark P. Rutten Finance Director

Mr. Hendrik A. Wymenga Technical Director

Mr. Franco Maggi Marketing Director

Mr. Hurbert I. Eze Sales Director

Mr. Victor Famuyibo Human Resource Director

Mr. Roland Pirmez Non-Executive Director

Chief Samuel O. Bolarinde Non-Executive Director

Dr. Obadiah Mailafia Non-Executive Director

Mrs. Ndidi O. Nwuneli, MFR Non-Executive Director

Mr. Olusegun S. Adebanji Non-Executive Director

Mr. Atedo N. Peterside Non-Executive Director

Mr. Sijbe Hiemstra Non-Executive Director

Mrs. Ifueko M Omoigui-Okauru Non-Executive Director

Mr. Uaboi G. Agbebaku Company Secretary/Legal Adviser

Source: Nigerian Breweries Plc 2016 Annual Report and management presentation

During the financial year ended 31 December 2016, the Company employed an average of 3,646 persons

(2015: 3,777). As at 31 December 2016, NB’s total assets grew by 3.1% year-on-year (yoy) to ₦367.6 billion,

while shareholders’ funds stood at ₦165.8 billion (2015: ₦172.2 billion). The Company’s turnover grew by

7.8% yoy to ₦313.7 billion with profit after tax dipping 25.4% yoy to ₦28.4 billion during the year under

review.

Table 2: Background Information

Authorized Share Capital: ₦4 billion

Paid-up Capital: ₦3.96 billion

Shareholders’ Funds: ₦165.8 billion

Registered Office: Iganmu House, 1 Abebe Village Road, Iganmu, Lagos

Principal Business: Brewing

Auditors: Akintola Williams Deloitte Professional Services

Source: Nigerian Breweries Plc 2016 Annual Report



FINANCIAL CONDITION ANALYSTS’ COMMENTS

PROFITABILITY Nigerian Breweries Plc’s principal activities involve the manufacture and sale of alcoholic and non-alcoholic

beverages, from which the Company derives its revenue. During the financial year ended 31 December 2016

(2016 FYE), NB’s turnover improved by 6.8% year-on-year (yoy) to ₦313.7 billion, despite the slowdown in

the economy during the year. The turnover growth was driven principally by increases in product prices as

well as the resilience of the affordable brands to the economic shocks given increased consumer down-

trading, which was more than enough to compensate for the weaker demand for the premium brands. NB

derives the bulk of its revenue from Nigeria with the country accounting for 99.9% of total revenue in 2016.

In 2016 FYE, the Company’s cost of sales as a percentage of turnover ratio rose to 56.8% (2015: 51.5%). We

note that the ratio has been trending upward in the last three years due to upsurge in input costs especially

imported raw materials which rose sharply on account of the depreciation of the Naira during the same

period. Thus, NB’s gross profit margin dipped from 50.9% in 2014 to 43.2% in 2016.

During the year under review, NB’s operating expenses-to-turnover ratio fell marginally to 26.5% as result of

the Company’s cost optimisation strategy which led to administrative expenses declining by 8.6% over prior

year’s figure. This was more than sufficient to compensate for the increase of 4.9% in marketing and

distribution expenses during the same period. However, Nigerian Breweries posted a relatively lower

operating profit margin of 16.7% (2015: 21%),

which still beats our benchmark. Comparatively,

Guinness Nigeria Plc1 recorded a 3.8% operating

profit margin, while the Industry’s average was

13% during the same period.

The Company’s other expenses (representing

2.8% of turnover) rose by over 600% to ₦8.6

billion (2015: ₦1.1 billion) due mainly to the

significant jump in net loss on foreign exchange

transactions from ₦0.75 billion in 2015 to ₦7.6

billion in 2016. The FX transactions related

principally to importation of some inputs such as barley malt and sugar during the year. Although NB’s profit

before tax dipped by 27.3% yoy to ₦39.6 billion (representing 12.6% of turnover), the Company’s three-year

1 Guinness Nigeria Plc is NB’s major competitor in the Industry and the results quoted in this report relate to its 2016 Financial Report

ended 30 June 2016.

13%

19%23%23%

32%

43%

0%

10%

20%

30%

40%

50%

2016 2015 2014

PBT as % of turnover Return on equity

Figure 2: PBT margin & Return on Equity



23% 25%

38%

17%21%

24%

0%

10%

20%

30%

40%

50%

2016 2015 2014

OCF/Sales Operating profit margin

weighted average PBT margin of 16% beats both our threshold and the Industry’s average PBT of 13%.

In 2016 FYE, Nigerian Breweries posted a return on assets (ROA) and a return on equity (ROE) of 11% and

23% respectively. We note that NB’s ROE represents a premium over the average yield on 364-day treasury

bills of 14% during the same period.

Based on Nigerian Breweries’ first quarter financial results ended 31 March 2017 (Q1 2017), the Company’s

revenue increased by 17.7% yoy to ₦91.3 billion. The strong Q1 2017 topline performance was attributed to

product price hike effected in the Q4 2016, which compensated for the slight drop in sales volume during the

quarter. Although gross margin dipped by 363 basis points (bps) yoy to close at 44.4% in Q1 2017, it grew by

256 bps over the preceding quarter due to improvement in FX liquidity during the quarter.

In similar vein, the Company’s profit before tax margin in Q1 2017 remained at par at 19.1% yoy on account

on management’s deliberate policy to rein in operating and finance costs.

In our opinion, NB’s profitability is good and we expect the Company’s profit margins to continue to

outperform Industry averages going forward.

CASH FLOW

Nigerian Breweries has favourable terms of trade with both suppliers and customers. While the Company’s

terms of trade with suppliers extend up to 90 days, its major customers who are key product distributors

enjoy credit terms of within 30 days. This is evidenced by NB’s average number of days of trade receivables

and trade payables which stood at 15 and 123 days

respectively in 2016.

During the 2016 FYE, Nigerian Breweries recorded an

operating cash flow (OCF) of ₦71 billion, denoting a

5.1% decline year-on-year. The drop in OCF was

caused principally by a 25.4% dip in profit after tax,

but this was moderated by an upsurge in amount dues

to related parties as well as increase in other

creditors/accruals during the period under review.

Nonetheless, the Company’s OCF was more than

sufficient to cover returns to providers of financing

amounting to ₦40.2 billion, represented by dividend

(90%) and interest (10%). We also note positively that the net OCF of ₦55.6 billion was adequate to fund

NB’s other short-term obligations during the year under review.

Although the Company’s OCF-to-sales ratio has been trending south over the last three years, the 2016 FYE

and Q1 2017’s OCF-to-sales ratios of 23% and 28% respectively still beat our benchmark. In addition, NB’s

Figure 3: OCF/Sales & Operating profit margin



11

(17)

5

(20)

(15)

(10)

(5)

-

5

10

15

2016 2015 2014

N'b

illi

on

three-year average OCF as a percentage of returns to providers of financing of 198% is considered strong. We

note that the elective scrip dividend introduced by the Company and approved by shareholders in May 2017,

not only offers shareholders the flexibility to either to take cash dividend or shares, but also has the impact

of reducing NB’s dividend cash pay-out and borrowing costs.

Overall, the Company’s cash flow position is strong and we expect this to continue to be sustained given

NB’s consistent favourable terms of trade.

FINANCING STRUCTURE AND ADEQUACY OF WORKING CAPITAL

Given NB’s satisfactory terms of trade, the Company is characterised by efficient working capital

management signified by its shorter average operating cycle of 66 days relative to its longer number of days

of trade payables of 123 days in 2016. This is also reflected in Nigerian Breweries higher non-interest

bearing liabilities of about ₦184 billion which was more than sufficient to fund working assets of ₦53.5

billion, leading to a financing surplus of

₦130.5 billion during the 2016 FYE.

As at 2016 FYE, Nigerian Breweries Plc’s long

term funds which comprised both equity (87%)

and long term borrowings (13%), amounted to

₦182.8 billion. Consistent with the financing

structure trend over the last three years, the

long term funds could not match the

Company’s long term assets of ₦302 billion,

thereby resulting in a long term financing need

of ₦119.2 billion. Nevertheless, NB’s short-

term financing surplus of ₦130.5 billion was more than enough to cover this shortfall, leaving the Company

with a working capital surplus of ₦11.3 billion.

We note that the Company’s working capital and financing structure follow similar trend in Q1 2017 with

Nigerian Breweries recording a working capital surplus of ₦3.3 billion during the quarter.

The Company has revolving credit facilities with five Nigerian commercial banks totaling ₦66 billion

executed in 2016 with a tenor of five years each. The unutilised credit balance of the facilities stood at ₦60

billion as at 31 March 2017. In our opinion, the unutilised portion of the facilities serves as a cushion to

temper the long term financing need of Nigerian Breweries.

In our view, the Company has adequate working capital but the financing structure requires improvement.

Figure 4: Working capital surplus/ (deficiency)



18

12

28

-

5

10

15

20

25

30

2016 2015 2014

3%

10%11%

0%

2%

4%

6%

8%

10%

12%

2016 2015 2014

LEVERAGE

Nigerian Breweries Plc recorded total liabilities of ₦201.8 billion as at 2016 FYE, an increase of 9.4% year-

on-year. This was driven mainly by the significant jump in

amount due to related parties which rose by 121% during

the year. Non-interest bearing liabilities (NIBL) accounted

for 91% of total liabilities, while interest bearing

liabilities (IBL) represented the balance of 9%. Of the IBL

balance, long term borrowings constituted 95%.

As at 31 December 2016, NIBL which consisted largely of

trade creditors (33%), amount due to related parties

(18%), deferred taxation (16%), other creditors & accruals

(11%) and taxation payable (10%) amounted to ₦184

billion. The trade creditors are mainly the Company’s suppliers with terms of trade extending up to 90 days.

We note that the amount due to related parties (parent company) rose by about 120% yoy to ₦32.6 billion in

2016 due mainly to the devaluation of the Naira during the year.

As at 2016 FYE, the Company’s total assets were

funded by shareholders’ fund (45%) and total

liabilities (55%). In our view, this represents a

satisfactory equity cushion. As at the same date,

NB’s IBL (net of cash) to equity ratio at 3% as

well as net debt (total debt less cash) as a

percentage of average total assets at 54% are

in line with our expectations. In addition, the

Company’s three-year average cumulative

interest cover of 18 times is considered strong.

In the three months ended 31 March 2017 (Q1’2017), the NB’s financial leverage indicators such as interest

cover, IBL (net of cash) to equity ratio and net debt (total debt less cash) as a percentage of average total

assets are all in line with our benchmarks.

In our opinion, Nigerian Breweries has low leverage.

Figure 6: Interest cover (times)

Figure 5: IBD/equity ratio



OWNERSHIP, MANAGEMENT & STAFF

As at 2016 FYE, the Company’s issued share capital stood at ₦3,964,550,444 divided into 7,929,100,888

ordinary shares of 50 kobo each. Heineken N.V Group held majority shareholding (55.37%) of the Company

through its subsidiaries - Heineken Brouwerijen B.V (37.07%), Distilled Trading International B.V (15.61%)

and Heineken International B.V (2.69%) as at that date. The remaining 44.63% of the issued shares were held

by Stanbic Nominees Nigeria Limited (12.94%) and other individuals & institutional investors (34.38%). While

we note that the Company’s ownership is not well diversified, the parent company remains one of the largest

brewing brands operating across the different continents of the world.

Nigerian Breweries Plc is run by a sixteen-member Board, which is composed of nine Non-Executive

Directors (including the Chairman) and seven Executive Directors with rich, diversified background and

experience. The Board is supervised by foremost industrialist and renowned chartered accountant, Chief

Kolawole B. Jamodu as Chairman. Mr. Nicolaas A. Vervelde, who has been the Managing Director and Chief

Executive Officer since August 2010, has tendered his resignation to the Board with effect from 16 June 2017

to enable him take up a new role within the Heineken Group. Nevertheless, the Board has approved the

appointment of Mr. Johan A. Doyer as the Company’s new Managing Director/CEO on an interim basis

pending the appointment of a substantive MD/CEO.

The Company’s management team is composed of seven Executive Directors and several Senior Managers.

We note that the majority of the management team have been with the Company for more than a decade,

having worked within the Heineken Group in various capacities both locally and internationally. We also note

positively that the Company’s management is stable, well qualified and experienced.

Nigerian Breweries Plc has an exchange programme with Heineken International which affords staff

opportunities for cross-border experience. We note the fact the Company has a very robust training

programme which cuts across all functions and the different cadres of staff. About 2,556 employees

participated in various training programmes during the financial year.

As at 31 December 2016, Nigerian Breweries had an average of 3,646 staff on its payroll compared to 3,777

employed in 2015. In the year under review, the Company’s average cost per employee amounted to ₦10.7

million, representing a growth of 6.3% recorded over prior year. The increase is driven by the combined

effect of a marginal upsurge in staff costs (as a result upward review of salaries & allowances) and a drop in

staff number in 2016. The operating profit per staff of ₦25 million was able to cover the average cost per

employee 2.3 times during the same period. We consider the Company’s staff productivity to be satisfactory.



Management Team

Mr. Nicolaas A. Vervelde was appointed the Company’s Managing Director and Chief Executive Officer on 1

August 2010, after having served as a Non-Executive Director on the Board of Directors between 2001 and

2003. Mr. Vervelde started his career with Heineken in 1984 and held increasingly senior management

positions spanning commercial and general management functions in Europe, Africa, Bahamas, Caribbean

and Central America. Until his current appointment, he was the Managing Director for Heineken Caribbean,

Central America and Latin America. Mr. Vervelde has notified the Board of his intention to resign effective 16

June 2017 to assume a new role as Managing Director of Heineken Asia Pacific Region.

Mr. Johan Antonie Doyer has just been appointed by the Board as the interim Managing Director and Chief

Executive Officer with effect from 16 June 2017 following the resignation of Mr. Vervelde. Mr. Doyer joined

Heineken Netherlands in 1978 as Product Manager and subsequently held increasingly senior marketing

management positions in different regions. He became the General Manager in Vietnam followed by La

Reunion, Burundi, Democratic Republic of Congo, Chile and the Sedibeng Brewery in South Africa. Mr. Doyer

retired from Heineken in July 2015 as the Managing Director of Heineken Ethiopia. While in Ethiopia, he was

responsible for building the new company, integrating two acquired breweries, launching new brands and

overseeing the tripling of the company’s sales.

Table 3: Other members of Nigerian Breweries Plc’s senior management team

Mr. Mark P. Rutten Finance Director

Mr. Hendrik Wymenga Technical Director

Mr. Franco Maggi Marketing Director

Mr. Hubert Eze Sales Director

Mr. Victor Famuyibo Human Resources Director

Mr. Henk Van Rooijen Director of Logistics Source: Nigerian Breweries Plc 2016 annual report and management presentation



OUTLOOK Despite the economic slowdown which threw the country into recession, the first in twenty five years,

Nigerian Breweries Plc. was able to grow its turnover by 6.8% during the year ended 31 December 2016. The

Company followed up this performance in Q1 2017 with revenue rising by 17.7% year on year to close at

₦91.3 billion. The turnover growth in both 2016 FYE and Q1 2017 was driven mainly by steady price

increases across NB’s product range during the year under review. However, the Company’s profitability

indices such as gross profit and profit before tax margins were challenged on account of increasing cost of

sales as well as FX translation losses during the year. Nonetheless, these margins are still better than our

benchmarks. In our opinion, Nigerian Breweries’ profitability performances will rally in the short to medium if

there is an improvement in the macroeconomic climate in addition to the Company’s ability to continue to

transfer rising costs of production to the consumers.

In spite of challenges ranging from infrastructure deficit, increasing competition to declining disposable

income which has put the premium brands under pressure, the Brewery Industry still holds huge potentials.

The Industry continues to witness sustained growth especially in the lager value segment. In our opinion, the

Industry’s medium-term outlook remains strong due mostly to improving urbanisation, youthful & growing

population as well as opportunities for export to neighbouring West African countries.

We anticipate that NB’s cash flow will remain strong given that the Company will continue to enjoy favorable

terms of trade from customers and suppliers. We are also of the view that the Company’s working capital will

remain adequate but financing mismatch may persist going forward. Nevertheless, we note that NB’s

revolving credit facilities with five Nigerian commercial banks totaling ₦66 billion (having an unutilised

credit balance of ₦60 billion as at 31 March 2017) will serve as a buffer to moderate its long term financing

need. In line with prior years, NB’s leverage will remain low in the near term as demonstrated by Q1 2017

results.

We believe that Nigerian Breweries’ strategic agenda which is centred on both market leadership (strong

brands, affordable prices, increased market share) and cost leadership will enable the Company to take

advantage of the Industry’s inherent potentials in the short to medium term.

Based on the aforementioned, we attach a stable outlook to Nigerian Breweries Plc.



FINANCIAL SUMMARY STATEMENT OF FINANCIAL POSITION 31-Dec-16 31-Dec-15 31-Dec-14

₦'000 ₦'000 ₦'000

ASSETS

IDLE CASH 12,155,254 3.3% 5,105,713 1.4% 5,699,079 1.6%

MARKETABLE SECURITIES & TIME DEPOSITS

CASH & EQUIVALENTS 12,155,254 3.3% 5,105,713 1.4% 5,699,079 1.6%

FX PURCHASED FOR IMPORTS 8,429,048 2.3% 2,233,797 0.6% 364,674 0.1%

ADVANCE PAYMENTS AND DEPOSITS TO SUPPLIERS

STOCKS 24,785,242 6.7% 22,257,253 6.2% 22,341,593 6.4%

TRADE DEBTORS 12,753,803 3.5% 11,719,662 3.3% 11,293,928 3.2%

DUE FROM RELATED PARTIES 1,042,728 0.3% 742,304 0.2% 434,509 0.1%

OTHER DEBTORS & PREPAYMENTS 6,478,662 1.8% 5,091,462 1.4% 6,451,218 1.8%

TOTAL TRADING ASSETS 53,489,483 14.5% 42,044,478 11.8% 40,885,922 11.7%

INVESTMENT PROPERTIES 2,453,836 0.7% 4,177,379 1.2% 4,208,816 1.2%

OTHER NON-CURRENT INVESTMENTS 829,625 0.2% 829,625 0.2% 829,625 0.2%

PROPERTY, PLANT & EQUIPMENT 190,996,700 52.0% 197,108,847 55.3% 193,569,624 55.4%

SPARE PARTS, RETURNABLE CONTAINERS, ETC 6,459,461 1.8% 6,152,450 1.7% 6,136,866 1.8%

GOODWILL, INTANGIBLES & OTHER L T ASSETS 101,255,556 27.5% 101,288,631 28.4% 98,346,852 28.1%

TOTAL LONG TERM ASSETS 301,995,178 82.1% 309,556,932 86.8% 303,091,783 86.7%

TOTAL ASSETS 367,639,915 100.0% 356,707,123 100.0% 349,676,784 100.0%

Growth 3.1% 2.0% 38.3%

LIABILITIES & EQUITY

SHORT TERM BORROWINGS 870,611 0.2% 22,214,988 6.2% 230,380 0.1%

CURRENT PORTION OF LONG TERM BORROWINGS

LONG-TERM BORROWINGS 17,000,000 4.6% - 24,670,000 7.1%

TOTAL INTEREST BEARING LIABILITIES (TIBL) 17,870,611 4.9% 22,214,988 6.2% 24,900,380 7.1%

TRADE CREDITORS 60,099,628 16.3% 56,981,985 16.0% 51,695,706 14.8%

DUE TO RELATED PARTIES 32,624,891 8.9% 14,736,561 4.1% 8,550,842 2.4%

ADVANCE PAYMENTS AND DEPOSITS FROM CUSTOMERS - - -

OTHER CREDITORS AND ACCRUALS 19,596,065 5.3% 14,107,127 4.0% 23,569,778 6.7%

TAXATION PAYABLE 18,989,567 5.2% 20,215,330 5.7% 22,944,629 6.6%

DIVIDEND PAYABLE 12,676,038 3.4% 12,399,599 3.5% 7,563,291 2.2%

DEFERRED TAXATION 29,876,508 1.0% 31,914,564 1.0% 27,833,732 1.0%

OBLIGATIONS UNDER UNFUNDED PENSION SCHEMES 10,101,065 2.7% 11,903,504 3.3% 10,735,596 3.1%

MINORITY INTEREST

REDEEMABLE PREFERENCE SHARES

TOTAL NON-INTEREST BEARING LIABILITIES 183,963,762 42.9% 162,258,670 37.5% 152,893,574 36.8%

TOTAL LIABILITIES 201,834,373 54.9% 184,473,658 51.7% 177,793,954 50.8%

9.41%

SHARE CAPITAL 3,964,551 1.1% 3,964,551 1.1% 3,781,353 1.1%

SHARE PREMIUM 64,950,103 17.7% 64,950,103 18.2% 65,133,301 18.6%

IRREDEEMABLE DEBENTURES

REVALUATION SURPLUS 571,106 0.2% 365,702 0.1% 241,676 0.1%

OTHER NON-DISTRIBUTABLE RESERVES

REVENUE RESERVE 96,319,782 26.2% 102,953,109 28.9% 102,726,500 29.4%

SHAREHOLDERS' EQUITY 165,805,542 45.1% 172,233,465 48.3% 171,882,830 49.2%

TOTAL LIABILITIES & EQUITY 367,639,915 100.0% 356,707,123 100.0% 349,676,784 100.0%



STATEMENT OF COMPREHENSIVE INCOME 31-Dec-16 31-Dec-15 31-Dec-14

₦'000 ₦'000 ₦'000

TURNOVER 313,746,147 100.0% 293,905,792 100.0% 266,372,475 100.0%

COST OF SALES (178,218,528) -56.8% (151,443,890) -51.5% (130,788,296) -49.1%

GROSS PROFIT 135,527,619 43.2% 142,461,902 48.5% 135,584,179 50.9%

OTHER OPERATING EXPENSES (83,231,870) -26.5% (80,676,444) -27.4% (70,440,771) -26.4%

OPERATING PROFIT 52,295,749 16.7% 61,785,458 21.0% 65,143,408 24.5%

OTHER INCOME/(EXPENSES) (8,631,850) -2.8% (1,124,848) -0.4% (62,915) 0.0%

PROFIT BEFORE INTEREST & TAXATION 43,663,899 13.9% 60,660,610 20.6% 65,080,493 24.4%

INTEREST EXPENSE (4,037,985) -1.3% (6,152,242) -2.1% (3,618,672) -1.4%

PROFIT BEFORE TAXATION 39,625,914 12.6% 54,508,368 18.5% 61,461,821 23.1%

TAX (EXPENSE) BENEFIT (11,226,137) -3.6% (16,458,850) -5.6% (18,941,568) -7.1%

PROFIT AFTER TAXATION 28,399,777 9.1% 38,049,518 12.9% 42,520,253 16.0%

NON-RECURRING ITEMS (NET OF TAX) 1,301,129 0.4% (837,623) -0.3% (415,579) -0.2%

MINORITY INTERESTS IN GROUP PAT

PROFIT AFTER TAX & MINORITY INTERESTS 29,700,906 9.5% 37,211,895 12.7% 42,104,674 15.8%

DIVIDEND (36,473,864) -11.6% (37,266,774) -12.7% (43,485,550) -16.3%

PROFIT RETAINED FOR THE YEAR (6,772,958) -2.2% (54,879) 0.0% (1,380,876) -0.5%

SCRIP ISSUES

OTHER APPROPRIATIONS/ ADJUSTMENTS 139,631 281,488 147,625

PROFIT RETAINED B/FWD 102,953,109 102,726,500 103,959,751

PROFIT RETAINED C/FWD 96,319,782 102,953,109 102,726,500

Proof - - -

ADDITIONAL INFORMATION 31-Dec-16 31-Dec-15 31-Dec-14

Staff costs (₦'000) 39,031,407 38,047,404 28,817,068

Average number of staff 3,646 3,777 3,048

Staff costs per employee (₦'000) 10,705 10,073 9,454

Staff costs/Turnover 12% 13% 11%

Capital expenditure (₦'000) 22,312,880 30,554,005 84,328,378

Depreciation expense - current year (₦'000) 28,268,009 26,854,735 43,757,041

(Profit)/Loss on sale of assets (₦'000) - - -

Number of 50 kobo shares in issue at year end

('000)

7,929,102 7,929,102 7,562,706

Market value per share of 50 kobo (year-end) 14,200 13,600 16,530

Market capitalisation (₦'000) 1,125,932,484 1,078,357,872 1,250,115,302

Market/Book value multiple 68 6 7

Non-operating assets at balance sheet date

(₦'000)

3,283,461 5,007,004 5,038,441

Market value of tradable assets (₦'000)

Revaluation date - Investment properties

Revaluation date - Other properties

Average age of depreciable assets (years) 7 4 6

Sales at constant prices - base year 1985

(₦'000)

1,270,068 1,373,680 1,364,264

Auditors DELOITEE DELOITEE KPMG

Opinion CLEAN CLEAN CLEAN



STATEMENT OF CASHFLOW 31-Dec-16 31-Dec-15 31-Dec-14

₦'000 ₦'000 ₦'000

Operating cash flow (OCF) 71,034,454 74,832,241 101,567,135

Less: Returns to providers of finance (40,235,410) (38,582,708) (45,917,459)

OCF after returns to providers of finance 30,799,044 36,249,533 55,649,676

Non-recurring items 1,301,129 (837,623) (415,579)

Free cash flow 32,100,173 35,411,910 55,234,097

Investing activities (20,706,255) (33,319,884) (135,529,580)

Financing activities (4,344,377) (2,685,392) 76,465,714

Change in cash 7,049,541 (593,366) (3,829,769)

PROFITABILITY 2016 2015 2014

PBT as % of turnover 13% 19% 23%

Return on equity 23% 32% 43%

Real sales growth -7.5% 0.7% -8.1%

ROA (pre-tax) 10.94% 15.43% 20.40%

CASH FLOW 2015 2014 2013

Interest cover (times) 17.6 12.2 28.1

Principal payback (years) - - 1.5

WORKING CAPITAL

Working capital need (days) - - -

Working capital deficiency (days) - 21 -

LEVERAGE

Interest bearing debt to Equity 11% 13% 14%

Total debt to Equity 122% 107% 103%

IBD net of cash and Equiv. as a % of Equity without rev. 3% 10% 11%

Net Debt/Avg Total Assets Exc. Cash and Rev. Surplus 54% 52% 59%



RATING DEFINITIONS

Aaa This is the highest rating category. It indicates a company with impeccable financial

condition and overwhelming ability to meet obligations as and when they fall due.

Aa

This is a company that possesses very strong financial condition and very strong

capacity to meet obligations as and when they fall due. However, the risk factors are

somewhat higher than for Aaa obligors.

A

This is a company with good financial condition and strong capacity to repay

obligations on a timely basis.

Bbb

This refers to companies with satisfactory financial condition and adequate capacity to

meet obligations as and when they fall due.

Bb

This refers to companies with satisfactory financial condition but capacity to meet

obligations as and when they fall due may be contingent upon refinancing. The

company may have one or more major weakness (es).

B

This refers to a company that has weak financial condition and capacity to meet

obligations in a timely manner is contingent on refinancing.

C

This refers to an obligor with very weak financial condition and weak capacity to meet

obligations in a timely manner.

D In default.

Rating Category Modifiers

A "+" (plus) or "-" (minus) sign may be assigned to ratings from ‘Aa’ to ‘C’ to reflect comparative position within the rating category. Therefore, a

rating with + (plus) attached to it is a notch higher than a rating without the + (plus) sign and two notches higher than a rating with the -

(minus) sign.

17

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Documents

Nigerian Breweries Plc. Final Rating Review Report · 6 2017 Corporate Rating Review Report Nigerian Breweries Plc FINANCIAL CONDITION ANALYSTS’ COMMENTS PROFITABILITY Nigerian