Guinness Nigeria registers loss in half year period despite 6% rise in revenue

NIGERIA – Diageo’s Nigerian operating unit, Guinness Nigeria Plc has reported a 6% rise in half-year revenue in the period ended December 31, 2020 from N68.327 billion (US$179.2m) of the corresponding period of the previous year to N72.351 billion (US$189.7m).

The rise in revenue also lead to the increase of its operating profit by 4% to N3.7 billion (US$9.7m), despite the challenging business environment characterized by continued regulatory, competitive and inflationary challenges in Nigeria.

During the period under-review, the second quarter of its financial year was significantly impacted by challenges such as the disruptions emanating from the #EndSars protests, the continued restrictions due to COVID-19 which impacted a lot of consumption occasions in the December holiday season, and continued challenged consumer spending in the midst of high inflation.

Despite of that, operating margin remained broadly flat compared to last year as the reduced marketing and distribution expenses, flat administrative expenses, and disposal of previously impaired assets mitigated the gross margin declines.

Its cost of sale rose by 11% from N48.476 billion (US$127m) to N53.765 billion (US$14.1m) leading to a gross profit of N18.586 billion (US$48.7m), as against N19.852 billion (US$52m) in 2019.

However, with the devaluation of the naira, financing costs increased significantly by 49 per cent from N1.625 billion (US$4.2m) to N2.422 billion (US$6.3m), despite a reduction in the net interest cost on the back of better cash generation.

Guinness Nigeria recorded a profit before tax (PBT) of N1.293 billion (US$3.39m) compared with N1.934 billion (US$5.07m), while a jump of 160 per cent in tax from N619 million (US$1.6m) to N1.611 billion (US$4.2m) impacted the bottom-line to a loss of N317 million (US$831,000), as against a profit of N1.315 billion (US$3.4m) in the prior period.

Profit after tax was also impacted by a one-off historic settlement charge.

Speaking on the results announcement, Mr. Baker Magunda, Managing Director/CEO, Guinness Nigeria Plc said, “The business recorded good progress against our strategic focus brands. We saw growth across locally produced and imported spirits, Malta Guinness, and Ready To Drink (RTDs) brands.”

Meanwhile, reduced export opportunities impacted Guinness although the local sales show single digit growth mainly driven by the continued success of the Guinness Smooth innovation.

“On the overall, it was encouraging to note that the growth is being driven by the brands and categories that the business has strategically chosen to play in.” he said.

Looking ahead, Magunda said they will continue to drive their strategy which has deliberate focus on key categories, continuing to innovate to meet consumer needs, and driving productivity.

“Whilst we are conscious of the continued challenging operating environment with double digit inflation, pressured consumer spending and the continued impact of the COVID-19 pandemic, we are positive about the execution of our strategy for the remainder of the 2021 financial year.

“We remain confident of the resilience of our total beverage alcohol portfolio strategy as a key driver of sustainable growth in the market,” he said.

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