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Rising foreign exchange revaluation losses brought on by the depreciation of the Naira has pushed Guinness Nigeria Plc into record loss last year as inflationary pressure continues to drive pressure in cost.
For the year ended December 2023, Guinness Nigeria posted a loss after tax of N5.22 billion from a profit position of N4.02 billion as at December 2022.
The net loss was largely driven by a foreign exchange revaluation loss of N20.93 billion that surged by 450.78 percent from N3.80 billion as consumer goods firms bear the brunt of the unification of the foreign exchange market.
Rising inflation and huge exceptional loss have prevented top line impressive performance from translating into bottom-line growth.
Revenue was up 20.83 percent to N142.95 billion, thanks to its diverse and effective brand portfolio, product innovation and strong brand presence (especially in the southwest region).
There has been an escalation in the company’s cost of production as total cost (cost of sales plus operating expenses) rose by 20.44 percent to N128.70 billion in December 2023 from N106.85 billion the previous year.
The increase in costs is primarily attributed to a rise in raw materials and consumables cost (which constitutes approximately 70 percent of the total cost of sales).
It is noteworthy that skyrocketing prices of major raw material components such as sorghum and maize have dealt a major blow on the brewer.
Analysts at Meristem Securities say that the presence of strong competitors within the industry, coupled with the weakening consumer purchasing power acts as potential downward risks to future earnings growth.
“We opine that the high inflationary environment and the persistent depreciation of the Naira will exert downward pressure on the company’s profitability,” said the analysts.
Nigeria’s annual inflation rate continued to accelerate to hit a nearly 30-year high of 28.9 percent in December 2023, up from 28.2 percent in the prior month. Headline inflation has consistently exceeded the upper boundary of the central bank’s target range of 6 percent to 9 percent since 2015, primarily due to the substantial depreciation of the naira.
There are concerns that recurring net losses in the past two quarters may hinder some consumer goods firms from paying dividends to their shareholders, a situation that could stoke investors’ apathy towards sector stocks since investors like dividend paying stocks.
Guinness Nigeria has a dividend yield of 10.95 percent as its shares have gained 7.20 percent so far this year, underperforming the NGX-ASI index’s 36.61 percent.
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