It appears Nigerian Breweries Plc has capitulated to intense competition, currency volatility, inflationary pressures, rising borrowing cost, and decrepit infrastructure as the company posted its first net loss in more than a decade.
Despite product price increases as companies continue to pass on higher input cost to consumers, the largest brewer by capacity and market capitalisation recorded a sharp decline in sales volume.
The disappointing results came as a rude shock because the brewer had been a top pick of analysts who were sanguine that it would continue to leverage on its parent company to deliver high returns to shareholders in Nigeria.
For the first three months through March 2022, Nigerian Breweries posted a loss after tax of N10.71 billion, from a profit of N13.61 billion as at March 2022. This is the first loss in more than a decade, according to data gathered by MoneyCentral.
Sales were down 10.49 percent to N123.31 billion in the period under review as against N137.77 billion the previous year.
The brewer is no longer generating profit from its core operations as operating profit dipped by 92.07 percent to N1.88 billion; operating profit margin fell to 1.52 percent in March 2023 from 17.21 percent the previous year.
Net finance cost which surged by 552.27 percent to N19.32 billion compounded the brewer’s woes brought on by the devaluation of the currency or a weak currency and hawkish policy of the central bank that means firms will be paying more to service interest payments .
The central bank has raised its monetary policy rate to 18% from 17.5% in its February 2023 meeting, marking the second interest rate hike in 2023.The decision was made due to the rising inflation rate in the economy, with headline inflation reaching 21.91% in February, the highest level since September 2005.
Of course, consumer goods firms are struggling with volatility in the price of the global commodity market which balloons raw material cost, logistics problems, deteriorating disposable income, and foreign exchange illiquidity.
Perhaps more worrisome is that Nigerian Breweries no longer has the capacity to pay interest on its outstanding debt as times coverage ratio of 0.40 is lower than the internationally acceptable benchmark, 3.
The company’s shares shed 0.28 percent to close at N36.05 as of 2:00 pm on April 26 in Lagos. In short, the shares have lost 10.98 so far this year.