Guinness Nigeria Plc, the country’s second-biggest brewer, has posted the first quarterly loss since 2016 after its sales faltered on intensified industry rivalry amid a slow economic recovery, and borrowing cost doubled.
The brewer posted a loss of N370 million, widely missing about N800 million profit mark made in the same period last year.
Shares of Guinness slumped 9.88 percent to N26.45 per share, its biggest daily loss in almost two months, as the consumer goods firm lead the laggards Thursday in Lagos trading.
“The Board is confident that our strategy is sound, that we are making the right investments in the company and our brands to ensure our long-term competitiveness,” Guinness said, assuring consistent growth delivery for stakeholders.
Revenue slumped 4.3 percent in the three months to September 30 to N26.899 billion, as the company felt the brunt of the challenging macroeconomic and competitive environment which had led to a decline in Guinness’ market share in the 2018/2019 business year.
“This was further impacted by unfavourable mix performance and excise increases on both beer and mainstream spirits,” the board said. “These top-line performance factors, and especially the excise duty increases, impacted our Gross Profit.”
With the cost of sales almost unchanged at N18.95 billion, Guinness’ gross profit fell 12.8 percent to N7.95 billion which means the company spent about N3 naira more per N100 sales on the direct cost of production compared to N67 naira from every N100 sales last year.
Other income fell by 37.4 percent to N119.33 million while marketing and distribution expenses declined and administrative expenses dipped marginally in the period.
Operating profit, a profit from business operations (before deduction of interest and taxes, fell by 58.9 percent to N681.57 million.
Finance cost rose by 117 percent to N1.29bn in the three months. Net finance cost, the difference between the cost of financing the purchase of assets and the cash yield on the assets, was down by 144 percent as finance income grew 45.3 percent.
This resulted in a loss of N370.41 million and profit after tax margin of -1.4 percent, which means the company lost N1.4 from every N100 it made as revenue.
Analysts at Lagos-based United Capital in a consumer report published earlier in October noted weakness in Guinness’ Beer and Ready-To-Drink segment which is weighing on a slowly growing Spirits and Adult Premium Non-alcoholic Drinks (APNADs).
“Despite recent efforts to diversify its portfolio, the beer segment continues to contribute about 80 percent to topline while Spirit contribution, though growing, remains weak,” said analysts at the investment bank which still rates Guinness a Sell.
On the other hand, Chapel Hill Denham recommends a hold on the consumer goods stock with a target price of N42.13, an upside of almost 60 percent from Thursday’s closing price.
