Nigerian Breweries reports 28% decline in half year profits as costs spike 24.2%

NIGERIA – Nigerian Breweries Plc (NB) reported a 28% fall in profits during the first six months of 2019 ending on 30th June to US$ 36.84 million (N13.3bn) from, as increasing cost and continued to strain the company’s balance sheets.

Nigerian Breweries’ net finance cost spiked 24.2% to US$13.85 million (N5bn0 during the six months period, while the finance cost increase accelerated in the second quarter by 48%.

Revenues of the country’s largest brewer and a subsidiary of Dutch brewer Heineken NV also slipped by 1.4% decline to US$471.43 million (N170.2bn) from US$478.35 million (N172.7bn) in H1 2018.

The decline in performance was blamed on a myriad of factors including the impact on sales of the second wave of a new excise tax which came into effect on 4th June 2018.

On a quarter to quarter basis, net revenue improved by 4.4% to US$240.7 million (N86.9bn) in Q2 2019 while the decline in net profits was accelerated in the second quarter with the company recording a 36% drop in earnings to US$ 14.68 million (N5.3bn).

However, gross profit climbed higher by 4.3% to US$116.61 million (N42.1bn) in quarter two of 2019 from US$111.9 million (N40.4bn) in the first three months of the year.

According to a Nairametrics report, higher cost of sales was driven by a 1.1% year on year uptick in raw materials cost which consequently saw the company’s gross profit declined by 4.3% to US$228.51 million (N82.5bn) in H1 2019.

The company’s operating expenses climbed higher by 6.1% to US$117.16 million (N42.3bn) in first half of 2019 from US$110.24 million (N39.8bn)  of the corresponding period last year on the back of a 10.9% rise in marketing & distribution expenses H1 2019.

Administrative expenses recorded a double-digit decline of 14.8% to US$17.45 million (N6.3bn) in H1 2019 from US$20.5 million (N7.4bn) in H1 2018 due to a reduction in staff headcount following the resizing exercise done last year.

Operating expenses were significantly higher in quarter two, by 28.2%, causing a 16% slump on EBITDA for the quarter to US$50.97 million (N18.4bn) from US$60.66 million (N21.9bn) in Q1 2019.