Nigeria’s biggest beer makers record first loss in 7 years

Nigeria’s biggest beer makers posted their first combined loss in seven years in the first half of 2020, as revenues plunged. The beer makers surveyed by BusinessDay include Nigerian breweries, International Breweries, Guinness Nigeria and Champion Breweries.
The four companies posted a N9.7 billion loss combined as revenues declined 14.3 percent to N320 billion in the first six months of 2020 from N373.8 billion a year ago.
Although their cost of sales reduced by 11.8 percent to N216.9 billion from N246 billion in the period under review, the beer companies found a record loss impossible to avoid.

Beer makers in Nigeria are struggling to make sales this year due to weaker demand for consumers who have been hit by declining purchasing power and rising inflation. Most recent data by the National Bureau of Statistics (NBS) shows inflation accelerated to 13.2 percent in August 2020, the highest in 29 months.
The COVID-induced economic lockdown in the most part of the second quarter also took a toll on the revenues of beer makers following the closure of bars, restaurants, clubs, hotels and other social spots across the country.

The adverse economic impact of the pandemic contributed to a record 6.1 percent contraction of Africa’s biggest economy in the second quarter, according to NBS data.
“We are working in a sector which is under pressure at the moment,” said Baker Magunda, CEO Guinness Nigeria in a recent interview with Business Day.
Magunda also alluded to a cash squeeze that is hurting the industry.
“Many of our distributors are in that category—from small to medium enterprises; unfortunately, access to cash from the banks has been too difficult for them.”
“The cash squeeze permeated through the industry and has led many FMCGs into trading on debt,” Magunda said.

Nigerian Breweries
Nigeria’s biggest brewery by market capitalization saw revenue dip by 10.8% to N151.8bn in H1 compared to N170bn in 2019. Cost of sales was also down by 6.0% to N92.7bn in H1’2020 from N98.5bn recorded in the same period last year.
Profit before tax and profit after tax declined sharply by 57.0% and 58.0% to N8.3bn and N5.6bn respectively in H1’2020.
The biggest brewery has also seen its share price crash from N63.00 in June 2019 to N35.00 in June 2020 but has improved since then, closing at N41.05 per share on Monday.

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Guinness
Guinness recorded its biggest loss in 9 years in the first half of the year as the company recorded a Loss before and after tax of N17.1bn and N12.6bn, respectively.
Revenue tumbled by 20.63% to N104 billion in the first half of the year from N131 bn recorded in the same period last year.

Gross profit also dipped by 16.9% to N33.3bn in H1’2020 compared to N40.1bn in the first half of 2019.
Guinness Nigeria saw its share price plunge from N97 per share in the first half of 2020 to N14.50 per share as at June 2020 and closed at N13.45 per share on Monday.
It was not all gloom and doom for Guinness as the CEO said they were able to save some cost.
Cost of sales declined by 22% to N71 billion in H1’2020 from N91.4 billion recorded in the same period last year.

“In spite of the muted growth in the industry, we delivered strong volume growth,” said Baker Magunda, CEO Guinness Nigeria in a recent interview with Business Day.
“We saw an improvement in cost control, our cost of goods was good; in a country where inflation is 12 percent, we grew the cost by only two percent,” Magunda said.

Champion Breweries
Champion breweries saw revenue dip by 2.14 percent to N3.3 billion in H1’2020 compared to N3.4 billion recorded in the same period last year. Also, cost of goods sold dropped by 2.14 percent to N2.1 billion in first half of 2020 from N2.2 billion recorded in June 2019.
Net profit dipped by 73 percent to N120 million in H1’2020 from N208 million recorded in June 2019.
Champion’s share price dropped by 44 percent to N0.95 in June 2020 from N1.69 in June 2019. It has however declined even more since then, falling 5 percent to close at N0.90 on Monday.

International Breweries
International Breweries (INTBREW) saw revenue decline by 11.7% to N60.6bn in H1’2020 compared to N68 billion recorded in the same period last year.
The company’s loss before tax rose to N12 billion in H1 2020 up from the N10.5 billion recorded in 2019.
INTBREW also saw its loss after tax worsen from N6.8 billion in H1’2019 to N2.8 billion in the first half of 2020.

Cost of Sales declined -5.3% year on year and gross profit slowed by -35.05% compared to last year.
The share price which stood at N38.10 kobo per share in the first half of 2019 plummeted to N4.10 kobo per share in H1’2020. Share price for INTBREW on Monday closed even lower at N3.10 kobo per share.