The Nigerian brewery industry was faced inflationary pressures coupled with a Naira devaluation, which led to recurring losses.
Some companies relied on imported inputs, which bruised their bottom lines and diminished shareholder returns.
Adeola Adenikinju, president of the Nigerian Economic Society (NES), said the exchange rate challenge is still there as brewers are finding it extremely difficult to source their raw materials due to the naira devaluation.
“Inflation is also an issue for brewers because it is increasing the cost of raw materials and workers are asking for increased wages, while purchasing power has declined significantly for buyers because the real income has been compressed by inflation. The buyers are not purchasing the quantity they used to,” he stated.
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“The Nigerian brewery sector navigated a challenging 2024, marked by robust
revenue growth driven by price adjustments and sustained brand investments,
yet concurrently grappling with significant margin pressures,” analysts at Vetiva Research said in a note.
Vetiva Capital Management Research stated this in its FY’25 Consumer Goods Outlook titled ‘Course adaptation to face sustained headwinds’ where it highlighted that key players demonstrated strong top-line performance.
“Nigerian Breweries (NB) achieved a 77 percent year-on-year revenue increase to N710.9 billion in 9M’24, leveraging its diversified portfolio and extensive distribution network.
“International Breweries (INTBREW) reported 87 percent revenue growth to N343.4 billion in 9M’24, benefiting from its focus on more affordable beer brands,” the report stated,” the report said.
It stated that Guinness Nigeria (GUINNESS) achieved the most substantial growth, doubling revenues to N125.9 billion in Q1’25 (Q3’24), leveraging the local strengths of its new majority shareholder, Tolaram.
“However, these revenue gains were accompanied by significant margin erosion. Rising raw material and energy costs, exacerbated by the Naira’s depreciation, impacted profitability across the sector.
“Notably, barley and sorghum prices increased significantly during the year. For the 9M’24 period, NB’s gross margin contracted to 30 percent, INTBREW’s experienced a slight dip to 28 percent, and Guinness’s declined sharply to 11 percent in its Q1’25 period,” Vetiva analysts said.
BusinessDay analysis reveals that three brewers which are Guinness Nigeria Plc, International Breweries and Nigerian Breweries, recorded N274.5 billion after-tax loss in the nine months of 2024 due to high operating costs.
These brewers recorded losses except Champion Breweries, which reported an after-tax profit of N386.7 million in the nine months of 2024.
In the nine months of the previous year, three firms which are Champion Breweries recorded an after-tax loss of N77.69 million, International Breweries (N28.6 billion loss), and Nigerian Breweries (N57.2 billion loss) while only Guinness Nigeria Plc recorded an after-tax profit of N2.59 billion.
According to BusinessDay analysis, three out of four brewers analysed recorded negative retained earnings in the nine months of 2024 due to the Naira devaluation, indicating prolonged financial losses. However, only one recorded retained earnings.
Retained earnings are the net income left over for the business after it has paid out dividends to its shareholders. Negative retained earnings often serve as indicators of prolonged financial losses, potentially foreshadowing bankruptcy. Such circumstances may also imply that the company disseminated borrowed funds to shareholders in the form of dividends.
Read also: Brewers input costs rise on FX, logistics
Guinness Nigeria Plc, Nigerian Breweries, and International Breweries collectively incurred retained losses amounting to N475.4 billion in the nine months of 2024 while Champion Breweries recorded retained earnings of N3.04 billion.
Uchenna Uzo, a professor of Marketing at Lagos Business School (LBS), said the retained losses by the brewers is as a result of inflation that has continued to rise, the frequent increase in PMS prices and expenditure on packaging innovation.
“The exchange rate has also been an issue for brewers, it is more stable than it was last year but the naira is still much weaker but there are market adjustments by brewers to the situation,” he said.
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