Nigerian Breweries Plc, the largest brewer by market capitalization in Africa’s most populous nation, has recorded an improvement in profit growth, but spiraling cost of production is weakening margins.
The company’s earnings are driven by robust growth in beer volumes, following the reopening of trade channels as drinkers have started to hit the bar after a long hiatus caused by the sit-at-home measures by the government.
Nigerian breweries posted profit after tax of N8.21 billion as at September 2021, and that is 18.47 percent higher than 2020’s N6.93 billion.
Revenues were up 32.15 percent to N309.28 billion as at September 2021 from N234.03 billion the previous year.
However, the N8.21 billion profit falls short of the N24.01 billion the brewer posted in 2017, which coincided with the period companies were effortlessly able to hike price of their products and the introduction of a new foreign exchange regime by the central bank enhanced the flow of dollars in the foreign exchange market.
Over the past 4 years, brewers have been grappling with excise duties slammed on them by the government while continuous devaluation of the currency balloons input cost since they import raw materials to meet production.
Another elephant in the room is the foreign exchange scarcity. And that is on top of deteriorating consumer purchasing power.
And analysts fret that brewers are in hot waters as they may not be able to pass on rising input cost to the already beleaguered consumers, the majority that are unemployed and reeling from utility bills.
Nigerian Breweries total cost of production stood at N285.43 billion as at September 2021, and that is 34.36 percent higher than 2020’s N212.43 billion
Gross profit margin fell to 35.74 percent in September 2021 from 38.43 percent the previous year. Net profit margin reduced to 2.66 percent in the period under review from 2.96 percent the previous year.