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Guinness share price declines by 54.91% YTD

Guinness share price declined by 13.14%, since its released audited results.

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The share price of Guinness Nigeria Plc, the third-largest brewer by market capitalization, has declined by 13.14% since the 28th of August, when the brewer released its audited financial results. 

Guinness Nigeria Plc, in its financial statements, indicated that revenue decreased by 21% to N104.38 billion, compared to the N131.5billion revenue it reported in the same period of 2019. The company suffered a pre-tax loss of N17 billion, impacted by impairment losses amounting to N13.8 billion, due to the prevailing economic and COVID-19 impacted conditions.

This has led to a reaction in the stock market, as the shares of Guinness on the day of this disclosure, shed a whopping 9.29% to close trading activities for the week in the red zone, at N14.15 per share. 

It is worthy of note that since the 28th of August, its share price declined by 13.14%, from N15.60 to N13.55 at the end of the trading session for today. It is 5 kobo higher than the N13.50 market open price from Monday, a week ago.

However, Guinness share price has lost 54.91% YTD, and it is currently trading 55 kobo higher than its all-time low of N13.00.

Threats to the financial strength of Guinness 

Recently, NAFDAC restated its plans to phase out alcohol sales in sachets, and small volume PET and glass bottles. This is a follow up to the 50% reduction in the production capacity of alcohol in sachets, and small volume PET or glass bottles. 

This policy has raised concerns, as it is expected to affect Guinness’ revenue, since the company expanded the Ogba Brewery, by adding a PET line in 2018. 

However, Guinness’ exposure to the complete phasing out of alcohol sales in sachets, comes from its popular Orijin Bitters brand, and in the light of this, the revenue impact of the policy is expected to be marginal, as the exposure of Guinness to its whole spirits segment is 18%. 

The company is currently finding it hard to refinance its five-year outstanding related party loan of $22.5mn (N8.7bn), due to dollar scarcity. With the management stuck with a possible rollover, it has to decide whether to keep it as a dollar debt or convert the debt to local currency.

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COMMODITIES

Oil prices drop, currently on anemic demand

OPEC Secretary-General Mohammed Barkindo admits fuel demand is looking “anemic.”

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Crude oil prices drifted lower at the last trading session for the week. The drop is coming amidst a spike in COVID-19 cases across emerged markets which continues to weigh down on oil traders, as it is believed that the virus has curbed demand in two of the world’s biggest crude oil consuming areas.

OPEC+ plans to reduce its current supply cuts of 7.7 million barrels per day (bpd) by 2 million bpd in January, as OPEC Secretary-General Mohammed Barkindo admits that fuel demand is looking “anemic.”

Brent crude futures (LCOc1) lost about 0.9%, to trade at $42.73 a barrel at the time this report was drafted, while U.S. West Texas Intermediate (WTI) crude futures lost 0.9%, to trade at $40.58 a barrel.

However, with their prevailing price levels, both major crude oil benchmarks are heading for small gains this week.

A technical committee of the OPEC+ ended a meeting yesterday expressing their fears over rising oil supply, as reduced human mobility aimed at limiting the spread of COVID-19 has also curbed fuel usage.

What they are saying

Stephen Innes, Chief Global Market Strategist at Axi, in an explanatory note to our source, gave his outlook for the fragile oil market.

“There is a high probability of a supportive decision from the OPEC+ meeting at the end of November if the demand outlook remains cloudy, especially with COVID-19 spreading rampantly across Europe and with flashpoints igniting in other parts of the world.

“With COVID-19 fears ravishing the world, I am unsure if an OPEC extension of current quotas will still be considered the magic bullet for the oil price recovery.

“That said, a recovery in risk markets like stocks on ongoing stimulus deal might also echo in oil markets.”

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CURRENCIES

Exchange rate gains at NAFEX window as dollar supply improves significantly

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Forex turnover rose significantly by 464% as Nigeria’s exchange rate at the NAFEX window appreciated against the dollar to close at N385.67/$1 during intraday trading on Thursday, October 15.

Also, the naira remained stable against the dollar, closing at N462/$1 at the parallel market on Thursday, October 15, 2020 as BDC operators get another round of dollar supply from CBN

This is also despite the continuation of the protest against the special anti-robbery unit (SARS) by the Nigerian youth which has limited movement in major cities across the country especially Lagos.

Parallel market: According to information from Abokifx, a prominent FX tracking website, at the black market where forex is traded unofficially, the Naira remained stable against the dollar to close at N462/$1 on Thursday. This was the same rate that it exchanged for on Wednesday, October 14.

Current developments

  • The local currency has strengthened by about 7.8% within the last one week at the black market, as the CBN introduced some measures targeted at exporters and importers, in order to try to boost the supply of dollars in the foreign exchange market, and reduce the high demand for forex by traders.
  • The CBN has sold over $450 million to BDCs since they resumed forex sales on Monday, September 7, 2020. This was expected to inject more liquidity to the retail end of the foreign exchange market and discourage hoarding and speculation.
  • However, the exchange rate against the dollar has failed to sustain the initial gains made, after the CBN announced plans to provide liquidity.
  • BDC operators have urged the apex bank to reconsider the margin allowed for the currency traders, as it was inadequate to meet their expenses.
  • We also noted that forex traders monitored during the previous week, appeared to hoard forex, as they anticipated further depreciation in the market.
  • There has been a drop in speculative buying of foreign exchange, although demand backlog by manufacturers and foreign investors still puts pressure, and creates a volatile situation in the foreign exchange market.

NAFEX: The Naira appreciated against the dollar at the Investors and Exporters (I&E) window on Thursday, closing at N385.67/$1.

  • This represents a 16 kobo gain when compared with the N385.83/$1 that it exchanged for on Wednesday, October 14.
  • The opening indicative rate was N386.04 to a dollar on Wednesday. This represents a 34 kobo gain when compared to the N386.38 that was recorded on Tuesday.
  • The N392.78 to a dollar is the highest rate during intraday trading before closing at N385.67. It also sold for as low as N382/$1 during intraday trading.

Forex turnover: Forex turnover at the Investor and Exporters (I&E) window increased significantly by 464% on Thursday, October 15, 2020.

  • According to the data tracked  from FMDQ, forex turnover rose from $29.53 million on Wednesday, October 14, 2020, to $166.55 million on Thursday, October 15, 2020.
  • The CBN had in the past weeks moved to clear the huge backlog of foreign exchange demand, especially by foreign investors wishing to repatriate back their funds.
  • The huge increase in forex supply after yesterday’s drop reinforces the volatility of the foreign exchange market. The supply of dollars has been on a decline for months due to low oil prices and the absence of foreign capital inflow into the country.
  • The average daily forex sale for last week was about $169.93 million, which represents a huge increase from the $34.5 million that was recorded the previous week.
  • Total forex trading at the NAFEX window in the month of August was about $857 million, compared to $937 million in July.
  • The exchange rate is still being affected by low oil prices, dollar scarcity, a backlog of forex demand and shaky economy that has been hit by the coronavirus pandemic
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CURRENCIES

Naira falls again at black market as #EndSARS protest limits movement.

Naira depreciated marginally against the dollar, closing at N462/$1 at the parallel market on Wednesday.

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Forex turnover declined by 63% as Nigeria’s exchange rate at the NAFEX window depreciated against the dollar to close at N385.83/$1 during intraday trading on Wednesday, October 14.

Also, the naira depreciated marginally against the dollar, closing at N462/$1 at the parallel market on Wednesday, October 14, 2020.

Nigerian Youth has been protesting demanding an end to SARS, the special anti-robbery unit of the Nigerian Police. Protest has limited movement in major cities across the country.

Parallel market: According to information from Abokifx, a prominent FX tracking website, at the black market where forex is traded unofficially, the Naira depreciated against the dollar to close at N462/$1 on Wednesday. This represents a N1 drop when compared with the N461 that it exchanged for on Tuesday, October 13.

Current developments

  • The local currency has strengthened by about 7.8% within the last one week at the black market, as the CBN introduced some measures targeted at exporters and importers, in order to try to boost the supply of dollars in the foreign exchange market, and reduce the high demand for forex by traders.
  • The CBN has sold over $450 million to BDCs since they resumed forex sales on Monday, September 7, 2020. This was expected to inject more liquidity to the retail end of the foreign exchange market and discourage hoarding and speculation.
  • However, the exchange rate against the dollar has failed to sustain the initial gains made, after the CBN announced plans to provide liquidity.
  • BDC operators have urged the apex bank to reconsider the margin allowed for the currency traders, as it was inadequate to meet their expenses.
  • We also noted that forex traders monitored during the previous week, appeared to hoard forex, as they anticipated further depreciation in the market.
  • There has been a drop in speculative buying of foreign exchange, although demand backlog by manufacturers and foreign investors still puts pressure, and creates a volatile situation in the foreign exchange market.

NAFEX: The Naira remains stable against the dollar at the Investors and Exporters (I&E) window on Wednesday, closing at N385.83/$1.

  • This represents a 17 kobo gain when compared with the N386/$1 that it exchanged for on Tuesday, October 13.
  • The opening indicative rate was N386.04 to a dollar on Wednesday. This represents a 34 kobo gain when compared to the N386.38 that was recorded on Tuesday.
  • The N386 to a dollar is the highest rate during intraday trading. It also sold for as low as N380/$1 during intraday trading.

Forex turnover: Forex turnover at the Investor and Exporters (I&E) window declined further by 62.9% on Wednesday, October 14, 2020.

  • According to the data tracked  from FMDQ, forex turnover dropped from $79.53 million on Tuesday, October 13, 2020, to $29.53 million on Wednesday, October 14, 2020.
  • The CBN had in the past few weeks moved to clear the huge backlog of foreign exchange demand, especially by foreign investors wishing to repatriate back their funds.
  • The drop in forex supply reinforces the volatility of the foreign exchange market. The supply of dollars has been on a decline for months due to low oil prices and the absence of foreign capital inflow into the country.
  • The average daily forex sale for last week was about $169.93 million, which represents a huge increase from the $34.5 million that was recorded the previous week.
  • Total forex trading at the NAFEX window in the month of August was about $857 million, compared to $937 million in July.
  • The exchange rate is still being affected by low oil prices, dollar scarcity, a backlog of forex demand and shaky economy that has been hit by the coronavirus pandemic
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