International Breweries Plc has cut its marketing and promotion budget from N11.812 billion to N8.416 billion. The brewing giant has also slashed short loss from N16.445 billion to N10.877 billion after its tax for the month of September 2020.
With production facilities in Onitsha, Ibadan, Port Harcourt, Abuja, Benin and Ilorin, IB recorded a revenue of N95.768 billion, down from N97.26billion in the year 2019.
“The upsurge in sales during the quarter rode on the back of recovering demand for alcoholic beverages, particularly as on-trade sales channels came back on stream. Although we consider International Breweries Plc’s product-price mix as a source of competitive advantage, we envisage that alcohol demand would come in slower than is usually witnessed in the celebration ridden Q4 period. Our view is also informed by pressured disposable incomes and even weaker purchasing power as consumers continue to grapple with surging inflation,” Analysts said.
The analysis shows that the company was able to cut cost on administrative expenses from N19.5 billion to N17.613billion, while market and promotion expenses fell from N11.812 billion to N8.416 billion. Financing cost took a big plunge from N13.136 billion to N1.8billion.
Report from the analysts noted that higher finance income and lower finance costs was the magical power behind the interest payments reductions.
“At just N1.83bn, net finance charges for 9M: 2020 showed a significant 86.09 per cent improvement over 9M: 2019 levels. The brewer also benefitted from tax credit of N6.84 billion which settled its LAT position atN10.88 billion. For the rest of the year, we reiterate our expectation of the firm remaining in a loss position due mainly to lingering cost pressures.
“For 2020FY, we have revised our EBITDA margin estimate to 6.50 per cent (N8.18 billion) and cut our target EV/EBITDA multipleto20.70x. This yields a target price of N4.05 –presenting a downside potential of 41.30 per cent when compared to its closing price on 9thNovember, 2020,” they added.