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Nigeria’s largest brewer records first loss in 6yrs on naira devaluation

Nigeria Brewries

Nigerian Breweries Plc, the country’s largest brewer, reported an after-tax loss of N106.3 billion in 2023, its first loss in six years, according to its audited financial results.

That’s after the naira devaluation resulted in a foreign exchange loss of N153.33 billion, causing the brewer to post a rare loss last year compared to an after-tax profit of N13.18 billion recorded in 2022.

“Despite strong and aggressive cost savings and other efficiency measures, coupled with the impact of the devaluation of the naira which resulted in a foreign exchange loss of N153 billion, the Company recorded a net loss of N106 billion during the year,” Hans Essaadi, Managing Director/CEO of Nigerian Breweries Plc said.

The naira has lost nearly 70 percent of its value since the shift to a more liberalised foreign exchange market last June, making it one of the worst performing currencies globally.

The company also attributed the loss to severe economic conditions marked by cash scarcity, removal of fuel subsidies, surging energy costs, foreign exchange scarcity and restrained consumer spending amid high inflation.

Operating profit declined by 15 percent to N44.5 billion, primarily due to rising input costs, one-off reorganization expenses, and other economic pressures.

However, amidst these challenges, revenue increased by 8.9 percent to N599.6 billion in 2023, driven predominantly by domestic sales amounting to N559.3 billion, while exports surged by 59 percent to N335.5 million.

Operating expenses rose by 5 percent to N171.13 billion, while net finance costs escalated to N189.2 billion from N34.4 billion in the previous year.

Other income recorded a decline to N2.95 billion from N2.98 billion.

Read also: Nigerian Breweries hikes prices again on rising input cost

Net cash generated from operating activities plummeted to a negative N74.67 billion from a positive N22.53 billion in 2022. Conversely, net cash from financing activities increased to N174.2 billion from N82.1 billion.

The company’s cash and cash equivalents stood at N39.6 billion, up from N22.2 billion in 2022.

Amid these financial challenges, Uaboi G. Agbebaku, the Company Secretary, affirmed the company’s commitment to leveraging its extensive experience and resources to navigate the current realities and drive long-term value for shareholders and stakeholders.

“In a difficult operating environment, the Board will ensure that the Company builds on its more than 77 years of experience of operating in Nigeria to cope with current realities,” Agbebaku said.

“The Company will continue to be resilient and forward-thinking leveraging our broad portfolio, strong supply chain footprint and passionate workforce to drive long-term value creation for its shareholders and other stakeholders,” Agbebaku added.

Additionally, Nigerian Breweries is pursuing strategic moves to diversify its revenue streams and bolster earnings, including acquiring an 80 percent controlling stake in Distell Wines & Spirits Nigeria Limited and fully acquiring the import business of Heineken Beverages (Holdings) Limited, valued at N7.01 billion.

The two deals were worth N7.01 billion, Nigerian Breweries said at an extraordinary general meeting held in December.

On Monday, the company announced it would execute an upward review of the prices of its products effective from 19 February on account of “continued rising input cost and the need to mitigate the impact.

Households and businesses across Nigeria are weighed down by stalled income growth, rising prices, and amplifying the cost of living in Africa’s biggest economy.

Nigeria’s fragile economy is faced with high inflation and rising poverty, heightened by the removal of petrol subsidies and the devaluation of the naira.

Nigeria’s annual inflation rate reached 29.90 percent in January, the country’s statistics agency reported today as the naira continues to weaken.

The Consumer Price Index report released by the NBS showed that prices rose by 0.98 percent to 29.90 percent in January 2024, compared with 28.92 percent in December.

The foremost inflation culprit in Nigeria today is the weakened currency. In January alone, the naira lost 21 percent, touching a record low of N1,530/$. This is largely because of the lingering disequilibrium in the forex market as dollar demand continues to outpace supply.

“It’s a bloodbath and conglomerates are being hammered,” a source familiar with the matter said.