• Wednesday, February 21, 2024
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Surging costs, weak consumer spending crimp Guinness Nigeria profits


Weak consumer spending coupled with surging operational costs slowed the growth of Guinness Nigeria as profits fell in the half year period to December 2013, results released by the brewer showed.

“We cannot disregard weak consumer spending as it affected beer sales in prior periods,” said Wole Olusi an analyst with Meristem Securities a research firm in a telephone interview.

The six months result through December 2013 posted on the website of the Nigeria Stock Exchange showed profit before tax dipped by 32 percent to N6.4 billion compared with N9.4 billion a year earlier. Revenue declined by 13.8 percent to N52.8 billion.

Disposable income “continues to be challenged” by an increase in gasoline prices two years ago, Guinness Nigeria Chief Executive Officer Seni Adetu said on a conference on February 17.

While the beer market in Nigeria showed some recovery in the second quarter, government spending in the run – up to elections next year hasn’t been as strong as expected, impacting sales, he said.

“The dwindling performance of Guinness is more of internal than external as the operational cost to sales ratio increased to 47.93 percent from 46.5 percent last year.” said an industry analyst by phone who preferred to be anonymous.

The company’s financial statement further revealed that total assets increased by 8.62 percent to N131.2 billion from N121 billion in the previous year. While earnings per share shrank by 22.1 percent to 332k

Bank overdraft in the same period soared by 367 percent to N17.50 billion from N3.74 billion recorded last year, while debt ratio spiked to 86.5 percent from 65.1 percent last year.

Parent company Diageo, the world’s biggest distiller, said Jan. 30 a slowdown in emerging markets including China and Nigeria weighed on first-half sales growth.

The brewer joins companies from Unilever NV to Remy Cointreau SA that are seeing a slowdown in previously fast-growing regions due to fluctuating currencies, economic turmoil and government crackdowns.