Guinness Nigeria first quarter profit declines 59% amid economic challenges

NIGERIA – Guinness Nigeria Plc has recorded a 59% decline in operating profit in its first quarter results ending September driven by a drop-in revenue of 4% to N26.9bn (US$74m) from N28bn (US$77.2m) recorded in the same period in 2018.

The breweries attributes the loss to a challenging macroeconomic environment, coupled with competition, unfavourable mix performance and excise duty increases on both beer and mainstream spirits.

Commenting on the results, the company noted that “These top line performance factors, and especially the excise duty increases, impacted our Gross Profit. However, operating profit reduction was mitigated by several cost line initiatives.”

Cost of Sales was flat, benefiting from “improved efficiency plus a number of productivity initiatives, while distribution cost reduced by 16% through our efficient utilisation of fixed cost logistics assets.’’

The company saw net finance cost skyrocket by 144% to N1bn (US$2.7m) from N432m (US$1.1m) pushing the firm to declare N370m (US$1m) loss compared with the N835.66m (US$2.3m) gain recorded in the corresponding period of 2018.

Analysis of the financial statement showed that the loss was on the back of a spike in the company’s finance cost. The finance cost grew from N593m (US$1.6bn) in the third quarter of 2018 to N128bn (US$353m) in the third quarter of 2019.

A breakdown of the components of the finance cost revealed an 863 per cent increase in interest expense on overdraft, which grew to N340m (US$0.9m) from N35m (US$96,551) in the corresponding period of 2018.

Finance expense on loans and borrowings also increased by 18 per cent to N385.54m (US$1m) from N326.15m (US$0.8m) in 2018.

Guinness Nigeria Plc has paid N340m (US$0.9m) as interest on its bank overdraft which increased from N6.56bn (US$18m) at the end of June to N8.68bn at the end of September.

The company also recorded a 170 per cent increase in loss on re-measurement of foreign currency balances from N195.72m (US$0.5m) in 2018 to N527.54m (US$1.4m) in 2019.

Total assets, however, grew to N171.54bn (US$47.3m) from N160.79bn (US$443m) in June 2019 while total liabilities increased to N81.85bn (US$225m) from N71.73bn (US$197.8m) in June.