In its recently released Q1 2022 financials, Guinness Nigeria announced a Revenue growth of 58.1% y/y to N47.47bn from N30.02bn in Q1 2021. Guinness Nigeria Plc has a 30June accounting year-end. The performance reflects a sustained growth in topline performance from the FY 2021 position, occasioned by improvement in sales through on-trading channels, as both local (up 58.4% y/y to N46.95bn) and export (up 38.7% y/y to N0.52bn) sales channels recorded positive growth. We, however, largely attribute the steep growth in Revenue to base effect as sales were low last year due to the outbreak of covid-19 and the restrictions to movement and social gatherings that followed.
Cost of Sales (adjusted for depreciation) grew, up 42.7% y/y to N30.68bn from N21.49bn in Q1 2021. Revenue growth, however, outpaced growth in Cost of Sales in the period. In our opinion, the cost of sales growth was driven by volume increase, FX depreciation, rising local prices, and carriage cost. The slower growth in Cost of Sales relative to Revenue resulted in a 96.8% y/y growth in Gross Profit to N16.79bn from N8.53bn in Q1 2021. In addition, Gross Margin grew 7.0ppts to 35.4% in Q1 2022.
Operating Expenses (adjusted for depreciation) was up 39.3% y/y to N8.46bn from N6.07bn in Q1 2021. The combined rise in its sub-components drove this growth. Administrative Expenses (up 23.8% y/y to N2.29bn) and Marketing & Distribution Expenses (up 46.1% y/y to N6.17bn) rose in the period. Despite the surge in OPEX, Earnings Before Interest, Tax, Depreciation and Amortization grew significantly, up 221.6% y/y to N8.58bn. Depreciation and Amortization dropped marginally (down 0.4% y/y) to N2.07bn from N2.08bn in Q1 2021. Overall, Operating Profit grew significantly to N6.51bn from N0.59bn in the corresponding accounting period in 2021.
Net Finance Cost declined in the period, down 38.1% y/y to N0.56bn from N0.90bn in Q1 2021 driven by growth in Finance Income (up 9.6% y/y to N0.51bn) and a decline in Finance Cost (down 22.0% y/y to N1.07bn. We observed that the growth in Finance Income was on the back of growth in interest income ( up 23.8% y/y to N96m) and the technical adjustment of the Naira, as gain on re-measurement of Foreign Currency balances grew 6.7% y/y to N410.10m from N384.43m as of Q1 2021. Finance Cost thrived on the significant drop in Finance Expense on Loans and Borrowings, which dropped 78.0% y/y to N120.33m from N546.92m in the corresponding period in 2021.
Overall, the firm moved from making a Loss Before Tax of N0.32bn in Q1 2021 to a Profit Before Tax position of N5.95bn in Q1 2022. Despite a Tax Expense growth of 263.1% y/y, the company reported a Net Income of N4.04bn, leading to a Net Margin of 8.5% compared with -2.8% in Q1 2021