• Monday, April 15, 2024
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BusinessDay

Naira devaluation triples Nigerian brewers’ finance costs in H1

Nigerian beer makers

Nigerian beer makers have recorded a 152 surge in finance cost to N117.96 billion in the first half of 2023 due to the naira devaluation.

The beer makers saw finance costs rise to N117.96 billion in H1 2023 from N46.81 billion in the corresponding period of 2023.

Guinness Nigeria recorded the highest increase of 2401.9 percent growth, Nigerian Breweries followed with a record of 260.8 percent growth, International Breweries reported 127.9 percent year-on-year growth while Champion Breweries recorded a 12.7 percent increase.

“The biggest problem for a lot of consumer goods firms are FX losses because a lot of them have USD liabilities to import raw materials on credit and as they have their debt as books they need to convert it to naira, “Ayorinde Akinloye, an investor relations analyst at Seplat Energy Plc, said.

He told BusinessDay that brewers had higher cost problems, an inflation environment, the impact of raw materials cost, price of goods, and other raw materials that they use have an impact on their cost and their profit.

“FX pressure is the biggest impact on their performance. Inflation and FX are the two problems because as inflation affects them they are also increasing prices,” he said.

Read also: Nigerian brewers face profit cuts on excise duties, naira devaluation

Brewers’ analysis

Guinness Nigeria

Guinness Nigeria recorded the highest finance cost year-on-year growth compared to peers in the first half of 2023.

The brewer reported a 2401.9 percent growth in finance cost of N53.29 billion in H1 2023 from N2.13 billion in the same period of 2022.

Guinness Nigeria’s cost of sales climbed to N151.31 billion in H1 2023 from N134.16 billion in the same period of 2022.

Guinness Nigeria, a Nigerian-based subsidiary of Diageo Plc of the United Kingdom, was incorporated in 1962 with the building of a brewery in Ikeja. The brewery was the first Guinness operation outside Ireland and Great Britain.

Read also: Beer prices up as Nigerian brewers battle for survival

Nigerian Breweries

Nigerian Breweries followed in second place with 260.8 percent year-on-year growth in the first half of 2023.

The brewery’s finance cost increased to N11.15 billion in H1 2023 from N3.09 billion in the same period of 2022.

Nigerian Breweries’ cost of sales grew to N165.09 billion in H1 2023 from N155.35 billion in the same period of 2022.

Nigerian Breweries Plc is the largest brewing company in Nigeria. It serves the Nigerian market and West Africa.

Read also: Nigerian brewers in a race for survival as macroeconomic pressures, competition bite harder

International Breweries

International Breweries stood in third place with 127.9 percent growth in finance costs in the first half of 2023.

The brewery’s finance cost increased to N13.17 billion in H1 2023 from N5.78 billion in the same period of 2022.

International Breweries’ cost of sales climbed to N92.11 billion in H1 2023 from N78.8 billion in the same period of 2022.

International Breweries plc is a brewery in Nigeria. It began production in December 1978 with an installed capacity of 200 000 hectolitres per annum, this increased to 500 000 hl/a in December 1982.

Read also: Nigerian Brewers suffer protracted selloff as industry fundamentals weaken significantly

Champion Breweries

Champion Breweries’ finance cost grew 12.7 percent year on year for the first half of 2023. The brewery’s finance cost climbed to N40.35 billion in H1 2023 from N35.81 billion in the same period of 2022.

Champion Breweries’ cost of sales rose to N4.43 billion in H1 2023 from N4.21 billion in the same period of 2022.

Champion Breweries PLC is a Nigerian brewing company located in Akwa Ibom state. The company is the producer of Champion lager beer and Champ Malta. Champion Breweries was established as a publicly funded commercial enterprise in 1974 and began manufacturing in 1976 with a capacity of 150,000 hecto litres of Champion beer and 10,000 hecto litres of Champ Malta.