32.2 C
Lagos
Monday, December 5, 2022

Guinness Nigeria Records First Annual Loss since 2016 on Virus Impact

Must read

- Advertisement -
- Advertisement -

Guinness Nigeria Plc has reported an annual loss for the first time since 2016, as the coronavirus forced bars, night clubs, and restaurants to shutter.

For the year ended June 2020, the company recorded a loss after tax of N12.57 billion from profit of N8.96 billion the previous period of 2019.

That’s the first loss since 2016 when a sharp drop in crude oil price tipped the country in its first recession in 25 years while manufacturers were unable to source foreign currency to import raw materials and equipment to meet production.

Revenue for Guinness Nigeria was down 20.58 percent to N104.37 billion as at June 2020, the steepest drop at the top line since 2014 as volumes growth fell, dragged by the continued restrictions on social gatherings and weekend parties.

The company’s finance costs or interest expense more than double to N4.24 billion in the period under review, while rising operating expenses overwhelmed gross profit, which led to operating loss of N12.83 billion.

The outbreak of the COVID-19 pandemic added a new layer of concern for most of the beer makers as lockdown in key revenue-generating and industrial states (Lagos, Abuja, and Ogun States) as well as the ban on inter-state movement dealt a great blow on cash flows.

Before the  outbreak of the virus from Wuhan city in China that ravaged economies across the globe, beer makers were the laggard in the consumer goods industry, thanks to weak consumer income and heft taxes by government.

Investors had thought that the entrance of International Breweries into the market seven years ago would create competition that would spur the industry to growth.

However, International Breweries have been struggling to survive as it has been recording losses since the start of last year, thanks to weak sales and rising interest income that has become a burden.

Analysts at Coronation Merchant Bank in a recent report noted that the returns of brewers have declined over the past 10 years.

“Their sales growth slackened as their customers turned to value-segment products, among which were the brands offered by International Breweries,” the Coronation Merchant Bank analysts said.

The relaxation of excise duties on alcohol by federal government will ameliorate the pains of alcoholic beverage producers that are grasping for breath.

In mid-2019 President Muhammadu Buhari’s administration introduced a phased 17 percent increase in duties on alcoholic beverages to boost non-oil earnings amid declining income from the oil industry.

Analysts at United Capital in a note to clients said, of the three major players in the brewery space, they believe Nigerian Breweries is in the best position to ride the tide, given its broader distribution channel and its wide factory footprints across the country.

Guinness Nigeria stock has returned -62.2 percent in the past year, and is trading at around N15 per share.

- Advertisement -
- Advertisement -

More articles

LEAVE A REPLY

Please enter your comment!
Please enter your name here

This site uses Akismet to reduce spam. Learn how your comment data is processed.

- Advertisement -

Latest article