International Breweries’ six-month loss widens to N107bn

The after-tax loss of International Breweries Plc, an alcoholic beverage maker in Nigeria, widened in the first six months of 2024, according to its latest financial statement.

The firm’s after-tax loss increased to N106.8 billion in H1 from N23.6 billion in the same period of last year. Its revenue grew to N223.2 billion from N116.1 billion.

“The revenue growth was primarily driven by a price increase implemented earlier in the year, which was necessary to offset the deteriorating business margins in the face of the country’s high inflation,” Goke Adetoyinbo, an analyst at CSL Research said in a recent note.

“However, the sharp rise in the cost of raw materials and overheads led to a significant increase in the cost of sales,” he added.

Further analysis shows that the cost of sales grew to N160.6 billion from N78.7 billion while other expenses surged to N134 billion from N35 billion.

“International Breweries, like other brewers, faced significant macroeconomic challenges in the 2023 financial year. These included the impact of the cash crunch and fuel scarcity in Q1 2023, which severely affected sales volumes, followed by FX scarcity and steep Naira depreciation,” Adetoyinbo said.

He said high inflation and the resulting decline in household real income also contributed to a slowdown in revenue growth during the year.

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“To adapt to the current market conditions, sustain operations, and protect margins, the company implemented an upward price adjustment of approximately 23.5 percent across its product range in Q1.”

International Breweries completed its 161.2 billion rights issue in June, offering shareholders six new ordinary shares for every existing share held at an issue price of N3.65/s.

“We believe the company’s earnings will likely remain under pressure as it navigates challenging macroeconomic conditions. However, based on our expectations for topline growth and cost of sales, we anticipate an improvement in the company’s operating performance in the near term,” CSL Research analysts said.

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“We forecast a gradual recovery in profitability, driven primarily by price increases and enhanced operational efficiency,” they said.

“The company has already exceeded our 2024 estimate for FX losses, which we initially projected at N34.5 billion. As of H1, International Breweries reported a substantial net foreign exchange loss of N141.98 billion, with 75 percent (N106.55 billion) realised and 25 percent (N35.45 billion) unrealised.”

International Breweries recently appointed Chijioke Ugochukwu as its new independent non-executive director.

Ugochukwu is a chartered director and fellow of the Institute of Directors (IoD), United Kingdom, and of the CIoD Nigeria as well as a Fellow of the Chartered Institute of Bankers Nigeria (CIBN).

“She has spent 34 years in the board room and is presently an independent director with Access Pensions Limited and Consolidated Hallmark Holdings as well as a non-executive Director with Chams Holdings and Card Centre Nigeria Limited,” the company said in a statement.