Coronavirus is a brewing threat for Nigeria’s beer makers following lockdown measures aimed at halting the spread of coronavirus in the country.
In the wake of the virus outbreak in the country, the Federal Government imposed restrictions on gatherings, social events, closure of restaurants, bars and hotels.
Specifically, on-premise demand for alcohol account for an estimated 64percent of total demand in Nigeria.
The impact of this restriction in the three states of Lagos, Ogun and FCT, which cumulatively account for half of the nation’ economy, is a material decline in beer volume, further worsening the woes of beer makers still struggling to remain profitable amid weak macro-economic environment and cash strapped consumers.
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While data on beer consumption volumes across Nigeria for 2019 is unavailable,
National Bureau of Statistics (NBS) 2016 figures show Nigerians spent a whooping N208 billion on alcohol consumption. Analysts estimate show that between 10-12percent of beer volumes, is consumed in Lagos.
Diageo-owned Guiness Nigeria plc, last week issued a revenue warning ahead of the release of its full year audited financial result for the period ended 30th June, an ominous sign of what to expect from the result of other beer makers in the country.
According to the brewer, the adverse impact of the sharp contraction in economic activities and the knock-on effect of the COVID-19 lockdown took a toll on the on-trade segment of its business across all markets with production and revenues been negatively affected.
The brewers of Origin drink said it carried out a comprehensive review of its asset base and made a strategic decision to impair a certain category of assets, which were generating suboptimal returns, in line with the company’s long-term strategy of delivering value to shareholders.
“Due to a combination of the impact of COVID-19 and the asset impairment, we expect the profitability of the Company for the Financial Year to 30th June 2020 to be impacted. The Company’s balance sheet however remains strong, and this gives the Board the confidence that the Company has the right resources to continue to deliver the strategy,” the statement said.
The audited financial results for the Year as approved by the Board will be published in accordance with extant rules and guidelines after the completion of the year end audit in the month of August 2020.
This market information forced Shares of Guinness Nigeria traded at N13.95 on Thursday, an all-time low as investors dump shares of the beer maker after it released a profit warning ahead of its full year financial result release.
Guinness reported revenue of N96.08 billion for the nine months that ended March 31, 2020, showing a fall of 5.3% compared with N101.40 billion recorded in the corresponding year of 2019.
In addition, financing cost rose by 97% to N3.582 billion compared to N1.817 billion recorded in 2019. Guinness Nigeria PLC ended the period with a profit after tax of N1.672 billion, plunging by 60% from N4.252 billion recorded in 2019.
While the NSE Consumer Index, the gauge used to measure performance of all consumer companies, has been the worst performer year to date. Shares Nigerian Breweries, Nigeria’s biggest brewer by market share, peaked at N191 in Q2 2017, however, it has seen its share price consistently decline, falling to a multi-year low of NGN25.50 as at the end of Q1 2020. The 3 years old selloff cost the brewery giant its priced place in the elite trillion-naira market cap club as the market valuation declined from N1.5 trillion in Q2 2017 to N204 billion in Q1 2020, losing as much as N1.3 trillion in market valuation over the last 7 quarters.
