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GGBL posts earnings recovery on improving consumer confidence

Guinness Ghana Breweries Limited (GGBL) has announced 31.7%y/y rise in topline to GHS207.29 million for the first quarter (July-September 2020) of its 2021 financial year. Consumer confidence, which hit a low during the coronavirus lockdown in April, has been recovering the last four months according data from the central bank. This has been a huge boost to the fortunes of consumer goods companies such as Guinness Ghana. GGBL’s revenue performance is likely to be a reflection of ongoing recovery in economic activity following a contraction in the previous quarter.

Guinness Ghana also had favorable cost implications during the first quarter of the year. Firstly, the company benefitted from lower cost of raw materials that reflected in a huge jump in gross profit (+110.7%y/y) to GHS58.47 million in Q1-2021. Secondly, the company also managed to control operating expenses during the pandemic, resulting in a 10.3%y/y growth in operating expenses in Q1-2021 versus 38.6%y/y growth in Q1-2020. Consequently, the operating expense ratio dropped to 16.2% in Q1-2021 from 19.3% in Q1-2020.  

The significant growth in revenue coupled with the favorable cost outturn combined to drive earnings in Q1-2021. GGBL’s profit before tax recovered from a loss of GHS7.96 million in Q1-2020 to a profit of GHS18.47 million in Q1-2021. However, there was a huge effective tax rate of 38.0%, which resulted in a net profit of GHS11.45 million in Q1-2021 from a loss of GHS6.67 million in Q1-2020.

However, despite the recovery in earnings and ongoing improvement in consumer confidence, it is likely that the pandemic may have affected the company’s investment plans. Capital expenditure declined by 21.5%y/y to GHS17.50 million in Q1-2020 from GHS22.29 million in Q1-2020. 

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