International Breweries Plc is grappling with higher input-cost inflation and supply chain disruption as the company has been recording losses in the last five years, but there are no threats to going concern.
For the year ended December 2022, International Breweries posted a loss after tax of N21.62 billion from a loss of N17.65 billion as at December 2021.
These recurrent net losses have been hindering the firm from paying dividends to its shareholders, and that’s detrimental to share price as investors are much more attracted to dividend paying stock which adds value to their earnings.
Sometimes investors perceive a dearth of dividend to signal poor or weak financial conditions.
It is important to note that the brewer that produces brands like Budweiser, Trophy Lager and Trophy Stout, has paid more on input costs to produce each unit of products.
The company’s total cost to sales ratio increased to 103.28 percent in December 2022 from 103.98 percent the previous year, according to MoneyCentral calculations.
In short, International Breweries incurred N255.83 billion on total production costs, which is 1.03 times sales, which led to an inevitable operating loss of N21.33 billion.
The elephant in the room is the inability of the company to pass on rising input cost to the final consumers whose wallets have been squeezed in the form of higher prices.
Analysts have warned that the foreign exchange crises could prevent firms benefiting from price increases and that combined with rising interest rates due to the central bank’s aggressive monetary stance are a recipe for existential crisis.
International Breweries whose shares traded at N51.82 as of April 23, 2018 now trades at N4.70 as of April 3, 2023, as investors dumped shares over disappointing results and lack of transformation policy on the part of the government.
Nigeria’s headline inflation rate rose to 21.91 percent in February 2023 compared to 21.82 percent of January 2023, indicating an increase of 0.09 percent points.