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Cash crunch swings International Breweries to N2.3bn loss in Q1

Cash crunch swings International Breweries to N2.3bn loss in Q1

International Breweries Plc (IB Plc), a part of the AB InBev Group, the world’s largest brewer with over 400 beer brands, is facing a challenging period as it grapples with declining revenue and mounting losses in its profit.

The brewery’s loss-after-tax stood at N2.31 billion in the first three months of 2023 compared to a gain of N721.2 million recorded in the same quarter of 2022.

Revenue also recorded a 5.4 percent decline in the first quarter of 2023 to N54.39 billion from N57.52 billion recorded in the same period of last year.

Cost of sales claimed 82.3 percent of the manufacturer’s total revenue during the period amounting to N44.75 billion in the first quarter of 2023 from N40.58 billion recorded in the same period of last year.

“We opine that the weakened consumer purchasing power moderated sales volumes as consumers continue to adjust their expenditure pattern in favour of the most basic needs, added to the fact that Q1 is usually a weak quarter for brewers. Again, Q1 2023 was characterized by cash scarcity which must have affected demand,” Goke Adetoyinbo, an analyst at CSL Research said in a statement.

The company’s financial report reveals recurrent losses in profit in the past five years.

The firm’s administrative expenses rose to N9.95 billion in the first three months of the year, a 9.4 percent from N9.09 billion recorded in the same period of last year.

Further analysis of the other expenses reported by the beer maker shows a 37.6 percent decline as a result of an increase in the net exchange gain of N1.2 billion in the three-month period of 2023 from a loss of N3.49 billion in the same period last year.

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Due to the interest hikes, finance income stood at N3.43 billion in the first quarter of 2023, a 127.9 percent increase from N1.51 billion recorded in the same period of last year, while finance cost amounted to N4.57 billion, a 36.4 percent increase from N3.35 billion in the period reviewed.

The beer maker’s total assets decreased to N481.34 billion in the first three months of 2023 from N484.25 billion recorded in the first three months of 2022.

Cash and cash equivalents held by International Breweries were down by 53.3 percent in the first quarter of 2023 to N29.32 billion from N62.78 billion recorded in the same period of 2022.

Cash generated from operations during the period was negative amounting to N29.49 billion, from a N6.21 billion gain recorded in the same period of last year, on the back of an increase in impairment loss on financial assets, inventories and interest expense.

Net cash flow from investing activities was positive totalling N4.74 billion largely due to investments in debt securities and interests received in the first three months of 2023.

Net cash flow from financing activities was positive amounting to N18.05 billion, due to proceeds from borrowings during the period under review from N-2.82 billion recorded in the same period of last year.