Naira shortage, galloping inflation bites Nigerian Breweries’ FY22 profits

NIGERIA – Nigerian Breweries Plc, the largest brewing company in Nigeria, said a shortage of Nigerian naira denominations and galloping inflation has led to an overall market contract by double-digit reflecting pressure on consumer disposable income.

The situation aggravated in the last two months as security concerns increased ahead of the country’s presidential elections on Feb. 25.

“Nigeria’s business environment remains very turbulent,” Hans Essaadi, chief executive officer of Nigerian Breweries Plc, said during an investor call on Friday. “The naira scarcity has aggravated things.”

The country’s central bank’s attempt to replace old naira notes with new ones has unexpectedly resulted in shortages in the last five months, stoking the ease of transacting in the cash-dominant economy. Inflation rose to 21.8% in January, the highest since September 2005.

Despite the macro-environment challenges, Nigeria Breweries reported a net profit increase of 8% to 13.9 billion naira (US$30.2 million) for the Full Year 2022 which ended on December 31 compared to the previous amount of 12.9 billion naira (US$28.1 million).

Net revenue grew by 26% to 550 billion naira (US$1.2 billion) in FY22 driven by brand mix improvements and strong pricing.

The inflationary pressure contributed to respective increases of 22% and 32% in production costs and administrative expenses, which resulted in a net profit of 13.9 billion naira ($30.2 million).

While the company faced increasing foreign exchange losses due to the devaluation of the naira and the shortage of dollars, it is worth noting the 63% reduction in taxes year-on-year enabled it to reduce pressure on profits.

The company also highlighted the sustainability strides of 2022 that it accomplished to meet its ambition of Net Zero emissions by 2040.

In May, the company signed a purchase agreement with Konexa, an integrated energy development and investment company to deliver 100% renewable energy that will fully cover the electricity needs of its Kakuri and Kudenda breweries.

The terms of the 10-year agreement ensure that the power supply needed for both breweries is sourced from full-service renewable hydro-power solutions.

In November, Nigerian Breweries and CrossBoundary Energy commenced two renewable energy (solar and battery storage hybrid) projects at the Ibadan and Arna breweries in Oyo and Enugu States.

In the agreement, CrossBoundary Energy will expand the current renewable energy system at Ibadan Brewery from a 663 kWp solar PV plant to a hybrid solar-plus-storage facility consisting of a 3 MWp solar PV system and a 2 MW/2 MWh battery energy storage system (BESS). Arna brewery will receive a 4 MWp solar PV plant and a 2 MW/2 MWh BESS.

The solar plants combined will supply approximately 10 GWh annually to Ibadan and Arna breweries at a significant reduction of their CO2 emissions by 100,000 tonnes over the lifespan of the plants.

The company prides itself on achieving zero-waste-to-landfill at 7 of its production locations – Awo-Omamma, ljebu-Ode, Lagos, Ota, Aba, Kakuri and Kudenda, which contributed to an overall performance of 97.05% waste diversion to landfill.

This is an improvement from our performance of 95.6% in 2021, according to Nigerian Breweries.

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