• Wednesday, April 24, 2024
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OPEX, FX losses weaken Nigerian Breweries’ profit

OPEX, FX losses weaken Nigerian Breweries’ profit

On the backdrop of a significant increase in total operating expenses and net loss on foreign exchange transactions, Nigerian Breweries Plc reported 27 percent decline in profit before tax and grew profit after tax by 4.06 percent over a decline in tax expenses.

The brewery’s profit increased to N13.19 billion in December 2022, up 4 percent from N12.67 billion in December 2021.

Net loss on foreign exchange transactions stood at N26.34 billion in December 2022, a 274 percent year-on-year increase from N7.04 billion in December 2021.

The brewery’s total operating expenses jumped 31.6 percent to N163.98 billion from N124.6 billion in the entire year 0f 2021 due to challenging operating environment and continuous focus of the brewery on brand visibility.

Nigerian Breweries’, in its Investors’ call on Friday disclosed that margins continue to be under pressure mainly from lower disposable income, inflationary pressure on input costs and naira devaluation.

Nigerian Breweries’ revenue climbed to N550.64 billion in December 2022, indicating a 26 percent increase from N437.29 billion in the same period of 2021.

“On the sales front, the company’s revenue growth primarily reflected a mix of higher prices and increased demand for its products, particularly in Q4. Management attributed the higher sales volume to the ramp-up in output at its Ama Brewery, which was completed on the 1st of October 2022,” CardinalStone said in a report.

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According to CardinalStone, this capacity support alongside a lesser pace of production cost increase, resulted in a 2.1ppts growth in its gross margin. Further down, operating margin expansion was slightly tapered by the rise in OPEX-to-sales ratio, primarily driven by the 184.6 percent and 40.8 percent increases in transportation and advertising costs, respectively.

Nigerian Breweries’ cost of sales grew to N337.31 billion in December 2022, 22 percent increase from N276.87 billion in the preceding year. The increase ibn the firm’s cost of sales can be attributed to inflation, high energy price, and naira devaluation.

The firm reported a gross profit of N213.33 billion in December 2022, a 33 percent increase from N160.41 billion in December 2021.

Profit from operating activities rose to N51.76 billion in 2022, up 25 percent from N41.5 billion in 2021. The brewery said the operating profit in 2022 is a result of the increase in net revenue, increase in raw materials and consumables, increase in advertisement and sales promotions, increase in transportation costs and other costs.

The brewery finance income grew 11.4 percent to N349.2 million from N313.52 million while finance costs increased by 24 percent to N8.42 billion from N11.07 billion in the reviewed period.

This led to a net finance cost of N34.42 billion in December 2022, 92 percent increase from N17.9 billion in December 2021.

“The company reported a 93.4 percent surge in net finance cost to N34.4 billion, following a 274.1 percent jump in net loss on FX transactions, which stemmed from its foreign currency payables. However, the company benefitted from the origination and reversal of temporary differences in deferred tax expense, which resulted in N4.9 billion in tax savings (28.3% of its PBT),” CardinalStone said in a note

Income tax expense, however, dropped 62 percent to N4.15 billion in December 2022 from N11.03 billion in December 2021.

The brewery property, plant, and equipment grew to N358.97 billion in December 2022, up 39.5 percent from N257.22 billion in December 2021.

Earnings per share stood at N158 in December 2022 from N157 in December 2021.