9M’21: Nigerian Breweries raises hope for big recovery despite rising cost

There are indications Nigerian Breweries (NB) Plc, Nigeria’s biggest brewer, may have recovered from a deep plunge the company in 2020 although challenges of rising input cost continue to rear its ugly head, an analysis from BusinessDay has revealed.

Last year marked three years of sustained profit drop for the company that set profit down below the 2005 level. The company’s nine-month performance seems to make a promise of reversing the sharp fall of 2020 to a big leap in the current financial year.

The brewing company built an after-tax profit of N8.2 billion in the first nine months of 2021, an 18.8 percent increase compared to N6.9 billion recorded in the corresponding period last year.

The profit of N8.2 billion has also already exceeded the full-year profit figure of N7.4 billion in 2020.

Most analysts say the biggest challenge for the company remains the inability to contain the rising cost of sales as there seems to be an imbalance in the growth of sales revenue and the cost of producing the unit of sales, which continues to undermine the company’s profit performance.

For instance, the company’s cost of sales increased by 37percent to N198.7 billion while revenue also increased by 32percent to N309.2 billion.

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The company could not pass a good part of the increase in sales revenue down to profit. Input cost per naira of sales revenue was as high as 64 kobo in the first nine months of 2021 compared to the company’s historic ratio of 50 kobo.

Nigerian Breweries’ operating profit grew by 10percent to N24.7 billion compared to N22.4 billion recorded in the corresponding period last year. This is a reversed movement from a drop of 16 percent in operating profit at the end of 2020.

Another major challenge that has remained with Nigerian Breweries this year is the rising cost of finance. An increasing trend in finance expenses recorded last year continued in the first nine months of 2021, growing by 3 percent to N11.9 billion at the end of the period.

“We have continued to stay relevant, relatable, and connected to our consumers, shareholders and that is really the timeless essence of everything that we do,” the Corporate Affairs Director of the brewery giant, Sade Morgan said at a media parley in Lagos to commemorate its 75th anniversary.

Morgan further said the firm has been able to win the hearts of consumers despite the odds because of its huge investment in human capital and other investments.

She said Nigerian Breweries has invested N78 billion in the cultivation of local raw materials in addition to sorghum and cassava value chains through commercial purchase and smallholder farming.

Also, the organisation is investing N55 billion in capital projects, while $114million has been pumped into capital investments and expansion projects in Ama Brewery to build a resilient economy through job and wealth creation.

On his part, the Managing Director of Nigerian Breweries, Hans Essaadi, assured that the company will continue to invest significantly in capacity extension to meet its objectives and rising demands in the market.

“We have grown with Nigeria and it is clear that moving forward, we will continue to invest significantly in capacity extension to meet our objectives as well as demands in the market.

“We should expect much of these extensions in the east and northern parts of the country and our majority shareholder, Heineken, is committed to this and this is good as it will bring direct and indirect job opportunities for Nigerians,” he said.

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