Nigerian Breweries profits fall 22% on new duty and tax revisions in the quarter

NIGERIA – Heineken’s Nigerian Breweries has reported 22% decline in Profit After Tax (PAT) to US$49.78 million impacted by new exercise duty and higher tax rates on beer in the first quarter of this financial year.

The federal government announced new excise duty rates on alcoholic drinks and tobacco, spread over a three-year period targeting wine, beer and spirits, something that the company said impacted on profitability in the period under review.

The upward review of the excise duty rates for alcoholic beverages and tobacco was to achieve a dual benefit of raising the Federal Government’s fiscal revenues.

Revenue decreased by 5% from US$500.5 million in 2017 to US$478.4 million while operating activities declined by 20% to US$88.5m from US$107.8m year-on-year, just as profit before tax also dropped by 19% from US$94.03m to US$77.44 million in the same period.

The first half results benefited from benefits of the price increases it took in 2016, to mitigate the effects of skyrocketing inflation and foreign currency challenges.

For the first six months of its financial year, the company declared a 15% growth in revenue and sales grew from US$430 million to US$500 million.

Overall costs and expenses increased by 28% as a result of double-digit inflation and a challenging operating environment.

According to the company, performance in the period was helped by a continued focus on productivity efficiencies as well as one-off ‘other income’ and a lower net finance charge.

The brewer said it expects operating environment to remain challenging but it is confident to deliver good returns despite of uncertain circumstances ahead.

It also continues to focus on reducing costs and increasing efficiencies across the business and further simplifying the organisation in order to achieve economies of scale in their business.

While presenting on its Q4 2017 results, the company cut its EPS forecasts by around -27% on average over the 2018-19E period.

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