Champion Breweries reverts to profitability on debt payoff

Champion Breweries Plc ability to pay off its loans has eased up pressure on its bottom line as the company reverted to the path of profitability amid a slow growing economy.

For the year ended December 2015, Champion Breweries posted a profit before tax of N210. 17 million compared with a loss before tax of N1.07 billion recorded in 2014.

Sales were up by a single digit 6.0 percent to N3.50 billion, caused by a weak consumer discretionary spending.

The company was able to revert to the path of profitability as it recorded zero finance costs in the most recent period compared to N1.28 billion in the earlier period.

“Finance Costs in 2014 Represents interest charged on N11.6 Billion due to The Raysun Nigeria Limited (parent company) which was fully repaid,” said the company’s 2015 audited financial statement.

Despite the huge production costs incurred by most Nigerian consumable goods companies as a result of tough operating environment and monetary policies, Champion Breweries’ cost of sales fell by 6.01 percent to N2.50 billion in 2015 from N2.66 billion in 2014.

Brewers in Africa’s largest economy have been grappling with rising production costs caused by a devaluation of the naira since 50 percent of raw material components used in the manufacture of beer are imported.

The Central Bank of Nigeria (CBN) has devalued the currency twice since March 2014 in order to stabilize an economy hard hit by a sharp fall in the price of oil by 60 percent to $40 a barrel. The Abuja based bank pegged the naira at N197-N199, while it exchanges for N315 at the parallel market.

Also, the apex bank imposed foreign exchange restriction by banning 41 items from its official market. The dollar scarcity has made it difficult for manufacturers to settle suppliers and import raw materials for the purpose of production.

Gross domestic product expanded 2.1 percent in the fourth quarter of 2015, according to the latest report by the National Bureau of Statistics (NBS). The industrial sector contracted 3 percent as port activities falters on import restrictions.

BusinessDay calculations shows Champion Breweries is spending less to produce each unit of product as cost of sales ratio reduced to 71.40 percent in 2015 as against 80.60 percent in 2014.

The Nigerian brewer as efficient in managing direct costs attributable to project as gross profit increased by 56.21 percent to N999.69 million in 2015 from N639.93 million in 2014.

Gross profit margin increased to 28.56 percent in the period under review from 19.40 percent in 2014.

Total equity grew by 21.29 percent N7.12 billion despite an accumulated loss of N9.58 billion.

The company’s share price closed at N2.96 on the floor of the exchange while market capitalization stood at N22.07 billion.

 

BALA AUGIE