INTERNATIONAL BREWERIES PLC REPORT (USING GUINNESS PLC AS A

COMPARATIVE COMPANY)

EXECUTIVE SUMMARY

International Breweries Plc is one of the key players in Nigeria’s Beer Industry. The Beer industry
in the country falls under the broad category Fast Moving Consumer Goods (FMCG). This industry
is one of the fastest growing in the country. This is largely attributed to the increasing population
of the country. A study was conducted in order to evaluate the prospects of International Breweries.
The result of the evaluation was later compared to that of Guinness Nigeria Plc.
This study therefore evaluated the performances of the two companies using ratio analysis. Six (6)
broad categories of ratios were used to assess both companies. The results show that International
Breweries Plc performed slightly better when compared to Guinness Nigeria Plc on key
performance ratios suck as profitability ratios, assets management ratios and cashflow ratios, while
on the other hand the company needs to improve significantly on ratios such as debt ratios,
investment ratios. The results of this study show that, though International Breweries need to
improve on most ratio’s, prospective investors should consider investing in the company
considering the potential for growth in the company.

INTRODUCTION

Despite the economic recession of 2017, the beer industry in Nigeria has been growing in
geometric progression. According to Euro monitor (an International Market Research), the
industry was valued at N900bn (about US$3bn) at the end of 2017. This is expected to grow
significantly in the next few years.

Due to the projected growth and resilient nature of the beer industry in Nigeria, there continues to
be an influx of multi-national brewery companies into Nigeria. Notable among the entrants are:
Heineken International of Holland that invested in Nigerian Breweries Plc; Diageo of Ireland that
invested in Guinness Nigeria Plc; and AB InBev, Belgium, that invested in SABMiller, which has
investment stake in International Breweries Plc. According to a publication in The Nation of
February 22, 2016, an Analyst at Glenbriar Technologies Inc (GTI), a leading investment-banking
group, beer consumption experienced an average growth of 10% in the last 10 years, and a
Compound Annual Growth Rate (CAGR) of 13% is predicted in the next 10 years. This entry by
international beer giants into the Nigerian market has led to significant investments in marketing
and advertisements by indigenous beer companies in order to increase their visibility and enhance
market share.

The present state of the beer industry in Nigeria coincides with the enactment of a number of
government policies aimed at diversifying the economy from relying solely on oil, particularly
after the rebasing of the country’s GDP in 2014.
One of our strengths as a nation is our population, comprised significantly of youth (about 75%),
and the rising middle class since the advent of the second republic in 1999. Quite a number of
these brewery giants compete with the local ones for market share in Nigeria.
In the last few years, the brewery industry has displayed an unusual trend from the past, with
Nigerian Breweries Plc leading in market share, and Guinness Nigeria Plc moving southward in
this regard. The downward trend of Guinness Nigeria Plc provides opportunity for new entrants to
displace them as one of the top three beer giants in the country. Consequently, our focus in this
article is a review of one of such indigenous breweries with a potential to rise to the top three -
International Breweries Plc – and a comparison of its financial performance against that of
Guinness Nigeria Plc.

International Breweries is a subsidiary of AB InBev of Belgium. The firm recently commissioned

its fourth plant in Sagamu, Ogun State, Nigeria. The newly commissioned plant cost about $250M,
and is the second largest brewery plant in Africa.
From research, we understand that AB InBev’s three Nigerian subsidiaries merged in December
2017 to form International Breweries. The three subsidiaries are:
 International Breweries Plc
 Intafact Beverages Limited
 Pabod Breweries Limited.
The combined businesses recently launched a product called Budweiser in April 2018 with the
intention of competing with the current industry giants.

FINANCIAL ANALYSIS

For the purpose of analyzing the financial statements of both entities, we will be assessing the
following categories of ratios:
a. Short Term Liquidity Ratios
 Current Ratio
 Acid Test/Quick Ratio
b. Profitability Ratios
 Net Profit Margin
 Return on Asset (ROA)
c. Debt Ratios
 Total Debt/Total Asset Ratio
 Fixed Interest Cover
d. Asset Management Ratios
 Inventory Holding Period
 Asset Turnover Ratio
e. Investment Ratios
 Earnings Per Share
 Price/Earnings Ratio
f. Cashflow Ratios
 Cashflow Coverage Ratio
 Operating Cashflow/Sales Ratio