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Wednesday, June 7, 2023

Champion Breweries Survives Fierce Rivalry as Profit Margins Spike

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Despite the fierce rivalry in the sector and product price increases, Champion Breweries Nigeria Plc has recorded increases in profit margins and uptick in domestic demand even amid strained disposable income and current economic instability.

Thus, the performance has been impressive as the net profit margin increased to 12.28 percent in December 2022 from 11.20 percent as at December 2021.

It is worthy to note that a higher net margin underlines the company’s efficiency in translating sales into actual profits as the metric is pivotal for rewarding shareholders who expect higher returns on their investments.

Profit after tax (PAT) spiked by 47.66 percent to N1.58 billion in the period under review from N1.07 billion the previous year.

Sales were up 28.58 percent to N12.28 billion as at December 2022 from N9.55 billion as at December.

Gross profit margin moved to 38.84 percent the period under review from 37.48 percent as at December 2021.

Despite the stellar performance, Champion Breweries and peer rivals are struggling with escalating material costs brought on by volatility in the price of key components like sorghum, Barley, and Maize, and that is on top of rising energy prices, logistics difficulty, and foreign exchange illiquidity.

The combination of domestic and imported inflation has cast a pall over the future earnings of beer markers because there is a limit to which a hike the key products that is hurting consumers who are downgrading to cheaper products.

“Though the improvement in revenue has continued to support margin, we note that the persistent rise in raw materials prices and other existing economic uncertainties could threaten earnings potential in the near term,” said analysts at Afrinvest Securities Limited.

The consumer price index (CPI), which measures the rate of change in prices of goods and services, rose to 22.04 percent in March 2023, up from 21.91 percent in the previous month.

“A major worry is about the inflation scourge constraining production, causing job losses, and courting an imminent recession. The inflation rate may ease in the near term driven by constrained consumer demand, harvests maturing in quarter three and the resumption of wheat exports from Ukraine to Africa. However, there are fears of falling growth due to constrained production in the past months,” said.

Champion Breweries PLC is a Nigerian brewing company located in Akwa Ibom state. The company is the producer of Champion lager beer and Champ Malta.

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