Earnings Report

International Breweries Yet to Explore Merger Benefits, Despite Investors’ High Valuation

Company: International Breweries Plc (IntBrew)

Rating: Hold

Current Market Price: 54.40

Intrinsic Value: 18.00


By: Jeariogbe Tunde Segun (Equity Analyst)


Key Financial Tickers:

  • This analysis viewed the nine months Audited financials result for the year ended 31st December, 2017. This was compared with the last Audited result for the year ended 31st March, 2017.
  • Explanation behind the different financial years above was the company’s decision to migrate its financial year from 31st March to 31st December, the decision which produced its first result at the end of 2017
  • During the last financial year, International Breweries concluded its merger with Itafact and Pabod, where it transferred all assets, liabilities, along with employees, real property and intellectual property rights to International Breweries Pls. Please note that the consideration of the transfer were transferred to the shareholders of Intafact and Pabod in form of ordinary shares of International Breweries Plc
  • On the strength of the above, on the14th December, 2017 a total of 5,301,612,656 ordinary shares of International Breweries Plc were listed on the Daily Official List of The Exchange.
  • With this listing of 5,301,612,656 ordinary shares, the total issued and fully paid up shares of International Breweries Plc has now increased from 3,294,249,280 to 8,595,861,936 ordinary shares.
  • The shareholding structure of the company shows that a single portfolio investors has 27.66% of International Breweries shares, 26 Foreigners hold 47.38% while Corporate bodies and Individuals control 10.39% and 7.44% respectively.


  • The company is currently being managed by Anheuser-Busch InBev which pride itself as the world largest brewer and one of the leading consumer product companies.
  • Anheuser-Busch InBev (AB InBev) acquired SABMiller (in 2016). Please note that before this time SABMiller was the major shareholder in International Breweries. As at 31st March, 2017 the company owns 72.17% of International Breweries


  • Tight business environment especially in the area of;
    • Foreign Exchange instability
    • Power generation hiccup and
    • High cost of funds
    • Amongst others
  • International Breweries plays the brewing market with the likes of Nigerian Breweries and Guinness Plc. Without much argument, one will safely conclude that it more of a fox and elephant challenge.
  • These two giant brewers dominated major business spheres within the country and also pride of numbers of nationally accepted products.
  • The reduced purchasing power of the Nigerian citizens is another challenge posing against the company’s business.

Corporate Figures

  • Despite the dwindling nature of sales in the brewing market, International Breweries improved its Turnover figure by 11.67% against the comparable year. Please understand that the figures include the turnover figures of the two new babies recently acquired
  • Leading from increase in the operating expenses and finance cost, the company reported a Loss before Tax of N3.99 billion as against the Profit before Tax of N8.08 billion in March 2017
  • Nevertheless, the loss position was rescued N4.758 tax assets that pushed the banks earnings back to profit line of N1.429 billion which is 38.18% above the N1.034 billion reported in the last audited result
  • Leading from the acquisition, the balance sheet items soared against the last audited financials
    • Retained earnings grew to N30.55billion from the N4.71 billion
    • Total Assets increased by 464.51% from N44.962 billion to N253.82 billion
    • Total Liabilities equally appreciated by 589.24% from N31.08 billion to N211.44 billion
    • And Net Assets now stand at N42.375 billion as against the previous N13.87 billion

Liquidity/Risk Ratios

  • Slightly above its industrial peers, International Breweries Debt to Equity ratio stood at 64.55% as against the industrial average of 60.77%
  • At 0.20x current ratio, it became glaring that the company will find it very tough to settle its short term liabilities when such falls due. Although the industrial average stood slightly below a unit, the 0.22x is quite on the low side
  • Nevertheless, International Breweries seems to be enjoying more investors’ patronage when compared to others in its sector as it controls a beta value slightly above a unit
  • With interest coverage of 1.56 International Breweries though may not need to assess more interest yielding loans, has enough capacity to finance existing loans

Profitability Ratios

  • The Cost of Sales margin increased by 16.46% from the 53.64% of last financial year to the current 62.47%. In our opinion the management of International Breweries should pay keen attention to this ratio, as it holds the key to the profitability of the company
  • Due to the loss before tax reported during the period, the Loss before tax in the below table was negative
  • Profit Margin on the other hand stood above comparable year’s by 23.75%
  • Both Return on Average Equity and Assets are low as shown in the table below
  • We hold mute on our score for the management of International Breweries due to the new changes occurring in the company. We are of the opinion that few other financials will be required for justification.

Efficiency Ratios

  • Total Asset Turnover stood below the last audited estimate by 80.22% from 72.75% to 14.39%
  • Equity Turnover though dropped against comparable year, remains attractive at 86.20%
  • Confirming the above, Equity Multiplier stood high at 5.99x as against the 3.24x
  • See below for other efficiency ratios

Investment Ratios

  • Due to the drop experienced in the income statement, Earnings per Share dropped by 47.55% against last result. The current earnings is N0.17 as against N0.32. Please understand that other factor responsible for this drop is the increase in the share outstanding of International Breweries as noted above
  • Giving the high valuation on International Breweries share price by investors’ sentiments, the earnings yield was close to zero at 0.31% as against the previous estimate of 0.98%
  • Confirming the high sentiments at play on the share price of International Breweries, is the over bloated PE/Ratio of 327.16x from 101.66x
  • Also the overpriced nature was further established by the Price to Book Value of 11x from 7.57x, and the estimated Book Value of N4.93.


  • Major consideration while placing value on the share price of International Breweries was its zero dividend nature. Although the management had promised a better investors’ incentive in the near future, we are of the opinion that until same is translated to realities through figures it remains in the future, hence our recommendation below;

Recommendation: In our opinion, International Breweries had work very hard to position itself against market competition and have taken time to ensure the company’s survival. We hold out valuation in favour of the investors. Therefore our valuation model had been set to consider a safe haven for investors. On the strength of the above, we have fairly placed each unit of International Breweries at N18.00.

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