The after-tax loss of Nigerian Breweries Plc, Nigeria’s biggest listed brewer, widened to N85.2 billion in the first six months of 2024 driven by high foreign exchange cost and operating expenses, according to its latest financial statement.
The brewer recorded an after-tax loss of N85.2 billion in H1 from N47.6 billion in the same period of 2023.
“The company continues to navigate the challenging operating environment characterised by soaring inflation, exchange rate volatility, security challenges, elevated input costs, and the rising cost of living,” Uaboi Agbebaku, company secretary of Nigerian Breweries said in a statement on Tuesday.
“Despite these headwinds, the company has demonstrated resilience and is on the path to recovery in its operations. Revenue grew by 73 percent in the half year compared to the same period in 2023,” Agbebaku said.
He said the growth was driven by strategic pricing, innovation, volume, and market recovery. “Gross profit grew by 42 percent, although lower than the rate of revenue growth, due to a 93 percent increase in the Cost of Goods Sold driven by currency devaluation and inflation.
“Through our cost-saving and other efficiency initiatives, we recorded a 34 percent increase in operating profit, again signalling the resilience and strength of our operations. However, largely due to foreign exchange losses arising from the devaluation of the naira, and high-interest expenses resulting from the increasing lending rates, the loss for the period went up by 79 percent,” he said.
He said the company is in the process of raising up to N600 billion in additional capital through a rights issue. The funds raised will be used to eliminate our foreign exchange-denominated debts and reduce our local debts thereby mitigating the Company’s exposure to the continuing economic challenges.
“The board remains confident in its long-term strategy to deliver value to our Shareholders and re-affirms the company’s enduring commitment to winning with Nigeria through people development, strategic innovation, operational efficiency, and community impact,” Agbebaku stated.
Further analysis shows that the firm’s net loss on foreign exchange transactions grew to N112.3 billion from N85.26 billion and input cost surged to N320.1 billion from N165.1 billion. Its revenue surged to N479.8 billion from N277.4 billion during the period reviewed finance income jumped to N332.5 million from N185.6 million and finance cost rose to N42.5 billion from N11.2 billion.
Read also: Shareholders approve Nigerian Breweries N600bn rights issue as devaluation risk weighs
“Nigerian Breweries continues to navigate a tough environment marked by high inflation and exchange rate volatility, which are impacting performance and dampening strong topline growth,” analysts at Cordros Securities said in a note on Wednesday.
“We expect sustained revenue growth, fuelled by robust pricing, and continued focus on premiumisation and product innovation. However, Nigerian Breweries is likely to remain in a loss position for the 2024 estimate, primarily due to the substantial impact of naira devaluation on its large FX-denominated payables, coupled with high costs.
“Nevertheless, to strengthen its balance sheet, the brewer is raising up to N600.00 billion through a rights issue in H2-24, which is expected to eliminate all debt (FX & local), thus positioning the company for a brighter outlook in the medium term. Our estimates are currently under review,” they added.
Nigerian Breweries announced the completion of the acquisition of an 80 percent controlling stake in Distel Wines and Spirit Nigeria Limited as part of efforts to expand its product offerings beyond beer to include wines, spirits, and flavoured alcoholic beverages.
The company disclosed this in a statement on Nigerian Exchange Group, signed by Sade Morgan, corporate affairs director of Nigerian Breweries.
The firm stated that the acquisition of an 80 percent stake in Distel Wines and Spirits Nigeria Limited follows approval from the South Africa Reserve Bank for Nigeria Breweries to acquire the shares of the parent company in Distel Nigeria and the import business of the parent company (Distel International) in Nigeria.
“Nigeria’s foremost brewing company, Nigerian Breweries Plc, has officially completed the acquisition of a majority stake (80 percent) in Distell Wines and Spirits Nigeria Limited (Distell Nigeria),” the statement said,
“The completion of the transaction follows the approval of the South Africa Reserve Bank (SARB) for the acquisition by Nigerian Breweries Plc, of the shares of the South African entity, Distell International Limited (now known as Heineken Beverages Holdings Limited) in Distell Nigeria, as well as the import business of Distell International Limited in Nigeria.”
Distell Nigeria operates in two main areas: local production of wines (both still and sparkling) and ciders, and the importation of wines, spirits, and flavoured alcoholic beverages from the Distell Group in South Africa. Its brand portfolio includes Amarula, JC Le Roux, Nederburg, Drostdy-Hof, 4th Street, Bain’s, Knights, Chamdor, Hunters, and Savanna.
The brewing company engages in brewing, marketing, and selling of lager, stout, non-alcoholic malt drinks, and soft drinks.
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