In the face of economic downturns, supply chain disruptions and intense foreign exchange challenges, Nigerian Breweries (NB), one of the top brewers in Nigeria was able to grow its revenue and maintain profitability in the 2021 business year, a feat it is confident of repeating in the 2020 business year.
For the period ended December 31st 2021, the brewer’s revenue grew by 29.7 percent to N437 billion from the N337 billion realized in the same period of 2019. NB’s profit for the year surged by 71.8 percent from N7.5 billion to N12.9 billion in the review year while results from its operating activities grew by 40.22 percent to N41.8 billion from N29.8 billion in the previous year.
Speaking during the company’s pre- Annual General Meeting (AGM) media briefing in Lagos, Hans Essaadi, managing director & chief executive officer, NB said the 2021 business year was dynamic and challenging as the company was burdened with scarcity of raw materials due to supply chain disruptions, FX challenges which was severely intense among other macroeconomic issues.
This heightened the problem with the production process as some inputs are only available abroad consequently its outstanding foreign payable rose by 76 percent in 2021. In addition the company was forced to revise upwards its operating and capital expenditures in order to cope with the constantly increasing cost.
Essaadi explained that the company’s exports dropped as shortages in FX limits the possibility of beefing up exports, hence the brewer concentrated on serving the domestic market effectively and efficiently.
“Currently our ambition is to sustainably be a part of the Nigerian economy with these investments but we really need foreign exchange and this has been a problem over the last 12 to 18 months,” Essadi said.
Rob Kleinjan, Finance Director at NB said the company’s Nigeria operations does not have a direct link to any importation from Ukraine or Russia, however its input cost and marketing expenses have continued to increase significantly, hence posing a challenge.
He specifically highlighted the rising cost of fuel and diesel which has an impact in the production and distribution process, adding that the company will have to review the price of its products upward during the year.
“Our cost of sales increased by 26.6 percent to N276 billion from N218 billion in 2020 driven by raw materials and energy cost, the company already absorbs these additional costs; the N10 per litre excise duty which the government wants to implement is an indirect consumer tax so going forward it will be passed on to the consumers,” he said.
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Speaking about the possible price increase, Uaboi Agbebaku, Company Secretary & Legal Adviser at NB Plc explained that before the company decides to increase the prices of its products, it considers the market dynamics, pricing and brand power, hence the point at which the price increase will occur as well as the possible amount cannot be immediately determined.
For dividend payment, Agbebaku said following the approval of shareholders at the company’s upcoming annual general meeting slated for the 22nd of April, a total dividend of N12.9 billion will be paid at N1.60 per share.
“In addition to this, NB is exploring a share for cash dividend election scheme where shareholders will be given an opportunity to reinvest their money and also increase their shares without incurring capital market transaction cost,” he said.
Giving an outlook for the 2022 business year, the MD said the volatility witnessed in the previous year will most likely continue without improvement in 2022 and early 2023 however the company is confident of having an impressive performance leveraging legacy, market strength, and pre-election spending which is expected to translate to increased consumer spend.
“Also the percentage of locally sourced inputs should increase going forward while we explore other alternatives to increase variety and bridge supply gaps as we extend our sorghum growing areas with the aim of developing higher yields,” he said.
The CEO added that the company is working on a road map to explore different renewable energy sources such as the exploration of hydropower in Kaduna to alleviate energy issues and also protect the environment.
