A deteriorating consumer spending exacerbated by the removal of subsidy on premium motor spirit (PMS) and the abrupt devaluation of the currency by the central bank has tipped Nigerian Breweries Plc into a loss position.
For the first nine months through September 2023, Nigerian Breweries Plc posted a loss after tax of N57.19 billion from a profit of N14.75 billion as at September 2022.
Revenue grew by 2.12 percent as at September 2023, which compares with an uptick of 27.21 percent in 2022 as inflation continues to wage a war on consumers and stealing workers’ wages.
The slim revenue growth is even amid a hike in key product to cushion the effects of rising inputs costs and the launch of AMA plant in Enugu in 2022, as most consumer goods firms have been challenged in 2023.
Of course, brewers are the hardest hit from sluggish economic growth due to the elasticity of their products as drinkers downgrade to cheaper brands whenever their wallets are squeezed.
The adoption of a unified exchange rate by the Apex Bank to spur foreign investment and curb severe foreign currency scarcity saw the Naira weaken by 67 percent and that ballooned the dollar denominated liabilities in the books of companies.
For instance, Nigerian Breweries incurred net loss on foreign exchange transaction of N86.82 billion, but the company can settle interest on debt even amid a high interest rate environment supported by an aggressive tightening cycle by the regulator.
The importation of raw materials exposes the company to imported inflation, but it is making consistent efforts at reducing imported raw materials.
The consumer goods giants spent on average N0.93 to produce every N1 of product, leaving it with a very slim profit margins. It spent N177.42 billion on raw materials and consumables, which is 71 percent of cost of sales.
Nigeria’s annual inflation rate accelerated to an 18-year high of 25.80 percent in August, according to latest data from the National Bureau of Statistics (NBS).
The IMF reports that the country’s economic growth will witness a decline from the 3.2 percent growth predicted for 2023, to 3.0 percent in 2024.
Analysts at Chapel Hill Denham in a recent note to client are sanguine about revenue growth on the back of capacity increases and aggressive expansion plans.
The company’s Kudenda expansion in Kaduna will begin operations in 2024, its first plant in the North.