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International breweries profit falls on rising cost as margins shrink

Suntory Beverage &Food sells Nigerian subsidiary for $14m

International Breweries Plc has had rising finance costs and operating expenses weigh on its third-quarter profit as gross margins shrink. For the six months ended 30th September 2017, International Breweries Plc recorded a loss of N52.1 million from a loss of N1.80 billion.

The Nigerian brewer’s gross profit was couldn’t cover finance cost and operating expenses, which is responsible for the loss it recorded in the period under review. The Nigerian brewer revenue rose by 29 per cent to N17.4 billion for the third quarter of 2017, against 13.4 billion recorded in the corresponding period of 2016.

Cost of Sales also increased by 34 per cent to N9.3 billion from N7 billion recorded the previous year. However, the company like other brewers are still struggling with weak consumer spending a result of slow economic growth. Analysis of the financial statement of International Breweries Plc however showed the negative profit was caused by the continued increase in operating expenses rising by 19 per cent to N3.5 billion against N2.81 billion last year.

READ ALSO: Nigerian Breweries’ profit dips by 58%, lowest in 7 years amid Covid-19

Administrative expenses swelled by 34 per cent from N2.7 billion in the same period in 2016 to 3.6 billion this year. The bottom-line of the company financial statement showed a profit before taxation of N275 million as against the N1.4 billion loss it recorded the same period last year.

However, finance costs continue to remain a major loophole at it gulps N2.2 billion in the period under review despite a 48 per cent reduction from 4.3 billion last year. The company gross profit also improved by 24 per cent to N8 billion against 6.4 billion in the corresponding period a good sign on the improving economic situation.

However, gross margins fell to 46.09 per cent in the period under review as against 48.03 per cent the previous year. In the second quarter of 2017, Nigeria Gross Domestic Product (GDP) grew by 0.55% (year-on-year) in real terms, indicating the emergence of the economy from recession after five consecutive quarters of contraction since Q1 2016.

David Ibemere