Guinness Nigeria, one of the top brewers in Nigeria and a subsidiary of Diageo Plc, has recorded a dip in profit after tax of 61.6 percent.
In its recently released 9-months financials for March 31st, 2023, profit after tax decreased to N5.86 billion from N15.27 billion recorded in the same period of last year.
Experts say the drop in profit can be attributed to the rising cost of doing business in Nigeria, characterised by rising inflation which impacted the firm’s cost of sales and operating expenses, and the high-interest rate environment which caused finance costs to spike during the period.
“We maintain our view that the weakened consumer purchasing power moderated sales volumes as consumers continue to adjust their expenditure pattern in favour of most contingent and basic needs added to the fact that the first quarter of the year is usually a weak quarter for brewers. Also, first, the first quarter of 2023 was characterized by cash scarcity which must have affected demand,” Goke Adetoyinbo, an analyst at CSL Research said.
The cost of sales reported by Guinness grew by 9.611 percent to N112.1 billion in the period that ended March 2021 from N102.26 billion in the same period of 2022, thereby accounting for 65 percent of the total revenue reported during the period.
The foreign extra stout brewer recorded revenue growth of 8.14 percent to N172.48 billion for the 9-month period in 2023 from N159.4 billion recorded in the same period of last year.
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Furthermore, the company’s operating expenses increased to N44.4 billion in the period under review from N35.64 billion recorded in the same period of 2022, with marketing expenses accounting for the larger chunk of the amount reported.
The beer maker saw its finance income and finance expenses surge by 67.4 percent and 523.4 percent respectively in the month period that ended March 2023 on the back of Interest expense on loans and borrowings and loss on remeasurement of foreign currency balances.
Finance income grew to N1.79 billion in the period under review from N1.07 billion recorded in the same period of last year, while finance expenses spiked to N9.28 billion in the period under review from N1.49 billion in the same period of 2022.
Guinness’s total assets increased to N217.61 billion in the 9-months period in March 2023 from N215.7 billion recorded in the same period of 2022.
Cash generated from its core business activities increased by 15 percent in the 9-month period to N23.6 billion from N20.53 billion recorded in the corresponding period of 2021.
Furthermore, the financial data shows that the beer makers’ net cash used in investing activities for the period was negative, amounting to N3.91 billion in the period under review largely due to the acquisition of property, plant and equipment during the period.
Net cash flow from financing activities was also negative, totaling N11.64 billion during the period due to the payments and finance expenses paid during the period.
Consequently, cash and cash equivalents for the period ended March 2023 amounted to N58.03 billion from N52.68 billion in the same period of 2022.