Performance: Contracted Margins

• Despite the 18.6% y/y rise in revenue, profit after tax declined marginally by 3.2% y/y to GHS 11.1m due to elevated operating costs

• The depreciation of the Cedi as well as supply chain disruptions also impacted the cost of sales which rose 15.0% y/y to GHS 218.2m, contributing to margin compression

• Consequently, net profit margin declined by 106bp to 3.8% as did gross profit margin which stood at 23.6% which was a 74bp y/y drop

• According to management, the 36.2% y/y rise in OPEX was driven by increased efforts to integrate and market new variants

Outlook: Product innovations and Capex expansion to bolster performance

• We anticipate that the Company’s margin contraction will subside in the coming quarters as a result of the addition of high margin premium brands, such as the new Baileys Delight and Smirnoff Chocolate Vodka to GGBL’s brand portfolio

• In addition to the above, we anticipate stronger revenue growth as we enter the festive season

• The above notwithstanding, we believe operating expenses will remain elevated in the coming quarters due to management’s indication of continuous investments in activation campaigns for ready-to-drink products and the Smirnoff brands

• We also anticipate CAPEX intensity to unwind gradually as the recently completed GHS 145.0m sorghum processing brew-house improves production in Guinness Foreign Extra Stout, Malta Guinness, and Guinness Smooth. According to management, production is expected to rise by about 150.0% in those brands

• Furthermore, we expect this sorghum brew-house to minimize GGBL’s reliance on imported cereals such as barley and malt which will impact the cost of sales positively

Valuation: Under Review

• We are in the process of re-initiating coverage on GGBL and have therefore placed our recommendation under review

• GGBL is however trading at a PE of 7.8x and PB of 1.7x