Nigerian Breweries Plc has enough money to pay dividend, which means equity investors will be favored as the consumer goods giant recorded double-digit growth in earnings even amid a challenging environment.
Used as a measure of showing how sustainable a company’s dividends are, the 2021 audited financial statement of the company shows dividend cover increased to 1.44x from 0.54x in December 2020.
Dividend cover is the ratio produced by dividing profit after tax by the dividends paid out to shareholders. A higher ratio suggests dividends are more sustainable and affordable for companies.
Interestingly, dividend cover significantly weakened to 0.65x in 2018 when dividend payment exceeded profit and the firm can make up for the short fall by scooping from retained earnings or reserves.
Companies tend to cut down on dividends either to retain money for future expansion or in case of deteriorating consumer spending and snail pace manufacturing growth.
The directors of the company have proposed a final dividend of N8.74 billion for 2021, which is 37.88 percent lower than 2020’s N14.07 billion.
The amount that investors get from distributable profit has been dwindling since 2017 as consumer goods firms are gradually adopting a conservative policy in the face of an unpredictable macroeconomic environment.
Shareholders and investors have enough reasons to be delighted with the performance of Nigerian Breweries who took advantage of the reopening of the economy to magnify volume while putting icing on the cake with hike in price of product.
Net income spiked by 72.14 percent to N12.67 billion in 2o21 from N7.36 billion the previous year.
Operating profit rose by 40.16 percent to N41.49 billion in the period under review from N29.60 billion. Gross profit increased by 35.15 percent to N160.41 billion in December 2021 from N118.69 billion the previous year.
There have been improvements in profit margins that shows the company has been able to turn each Naira invested in sales into higher profit; it has also been able to utilize owners’ resources to generate higher earnings.
Net profit margins moved to 2.90 percent in the period under review from 2.19 percent the previous year while gross profit margin rose to 36.68 percent in 2021 from 35.22 percent the previous year.
Return on average equity (ROAE) increased to 7.61 percent in the period under review from 4.48 percent the previous year.
The consumer goods giant is generating sales from its existing fixed assets as fixed asset turner ratio (FAT) ratio increased to 2.63x in December 2021 from 2.05x the previous year.
There are rooms for improvement. The company’s current earnings are below what it recorded in 2016 and 2017 as manufacturers have been reeling from foreign exchange scarcity, multiple taxation, decrepit infrastructure, and inflationary pressures.
It will be recalled that brewers were one of the hardest hit sectors by the coronavirus pandemic that forced the government to impose a lockdown policy that hindered consumers from hitting the bars to have drinks while recreation centers were shuttered.
As a result of an unpredictable macroeconomic environment, companies were forced to pass on rising cost to consumers in the form of higher prices, but the fret it that a continued hike may force customer whose wallets have already been squeezed by high utility bills to shut “Uncle”
While inflation moderated to 15.60 per cent (year-on -year) in January compared to 16.47 per cent in the corresponding year, it is below the central bank’s target range of 6-9 percent.
The Nigerian economy grew by 3.98 per cent year-on-year in real terms in the fourth quarter of 2021, the National Bureau of Statistics disclose.