Nigerian Breweries profit spikes amid rising income tax
Nigerian Breweries Plc’s is riding on the back of steep price increases it implemented last year as half year profit spiked despite increased income tax expense.
For the first six months through June 2017, Nigerian Breweries’ net income rose by 24.60 percent to N23.75 billion, from N19.06 billion the previous year.
Sales was up 15.02 percent to N181.07 billion as the company continued to leverage on the price increase across all products with a view to passing on costs to the final consumers.
|NIGERIAN BREWERIES: HALF YEAR FINANCIAL SUMMARY AND RATIOS|
|Cost of Sales (N’m)||99,676.00||83,391.00||0.20|
|Gross Profit (N’m)||81,333.00||73,982.00||0.10|
|Pofit Before Tax (N’m)||34,058.00||25,584.00||0.33|
|Profit After Tax (N’m)||23,751.00||19,066.00||0.25|
|Total Equity (N’m)||177,963.00||165,913.00||0.07|
|Total Assets (N’m)||389,207.00||367,146.00||0.06|
|Earnings Per Share (N)||297.00||240.00||0.24|
|Net Profit Margin (%)||0.13||0.12||0.08|
|Return on Equity (%)||0.13||0.11||0.16|
|Return on Asset (%)||0.06||0.05||0.18|
|Market Cap as at July 28 2017 (N’m)||1,361,000.00|
|Share Price as at July 28 2017 (N)
Source: Company’s Financials; BusinessDay Analysis
Fast Moving Consumer Goods Firms (FMCGs) in Africa’s most populous country and largest oil producer hiked price of premium brands in order to compensate for the Naira devaluation of June last year.
The local currency lost 40 percent of its value against the U.S dollars when the country’s central bank adopted the flexible exchange rate last year in a bid to ease liquidity in the foreign exchange market.
Nigerian Breweries recorded the double growth in earnings despite 37.86 percent increase in income tax expense to N10.30 billion.
The brewing giant has been able to translate each unit of sales into higher profit as net margin increased to 13.11 percent in June 2017 compared with 12.11 percent as a June 2016.
The company’s earnings before interest and tax (EBIT) margins increased to 21.71 percent in the period under review from 19.97 percent as at June 2016.
Nigerian Breweries interest burden eased as net finance costs fell by 37.42 percent to N5.25 billion as at June 2017; this was largely due to lesser devaluation impact. Total trade and other payables were up 4.50 percent to N116.16 billion in the period.
While the company recorded strong earnings in the period under review, it succumbed to cost pressures as cost of sales rose by 19.52 percent to N99.67 billion in June 2017.
The company and other firms operating in the FMCG industry have been grappling with rising production costs caused by huge energy and of raw materials costs. A weak naira ballooned cost of raw material as brewers imports barley and hops in large quantity.
The company intensified its drive to source materials locally in line with parent company’s target of obtaining 60 per cent of its raw materials need in Africa by 2020. The company views that such a strategy plan will help create employment in the local economy.
Further analysis of the company’s financial statement showed that it is able to utilize the resources of its owners in generating higher profit as return on equity (ROE) improves to 13.1 percent in June 2017 from 11.51 percent as at June 2016.
Nigerian Breweries shares declined 1.27 percent to N171.02 as at the close of trading on Friday, valuing it at N1.37 trillion.