Nigerian Breweries bleeds N85bn in H1 2024 as FX, operating costs bite

Business a.m.

Nigerian Breweries Plc, Nigeria’s largest  brewer by revenue, has seen its after-tax losses deepen to N85.2 billion in the first half of 2024, according to its latest financial report. The widening of losses has been attributed to a confluence of factors, including a rise in foreign exchange costs and mounting operating expenses. This marks a significant deterioration in the company’s financial performance when compared to the same period in 2023, when losses totaled N47.6 billion.

Upon closer examination, Nigerian Breweries’ financials reveal that, during the first half of 2024, the net loss on foreign exchange transactions rose to N112.3 billion from N85.26 billion, while input costs skyrocketed to N320.1 billion from N165.1 billion. However, the losses were somewhat offset by a remarkable 73% surge in revenue, from N277.4 billion to N479.8 billion, achieving the highest ever six-month revenue posted by a Nigerian brewer.

In addition, finance income jumped to N332.5 million from N185.6 million, while finance cost climbed to N42.5 billion from N11.2 billion during the same period.

Uaboi Agbebaku, the company secretary and legal director, explained that the  growth in revenue was primarily fueled by strategic pricing, innovation, increased volume, and market recovery. However, despite this growth, the gross profit growth rate lagged behind at 42 percent, due to a 93 percent spike in the cost of goods sold, attributable to currency devaluation and inflationary pressures.

Agbebaku outlined the company’s ongoing efforts to overcome the challenging operating environment caused by high inflation, exchange rate volatility, security concerns, escalating input costs, and the rising cost of living, while simultaneously maintaining its financial strength, as evidenced by the company’s significant revenue growth in the first half of 2024.

The company secretary also pointed out that despite the economic headwinds, the company managed to deliver a 34 percent increase in operating profit, a testament to its successful cost-saving and efficiency initiatives. However, this increase in profitability was largely negated by a 79 percent rise in net loss, mainly due to foreign exchange losses stemming from devaluation of the naira and high-interest expenses resulting from increasing lending rates.

“The Board remains confident in our 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, ” he assured.

Speaking on the result, Hans Essaadi, managing director/CEO, Nigerian Breweries Plc said: “In the 6 months ended 30 June 2024, Nigerian Breweries demonstrated resilience and is on the path to recovery as seen in the results delivered despite the challenging external environment characterized by high inflation and heightening operating costs.”

“Our revenue grew by 73% in the half-year compared to the same period in 2023. The growth was driven by strategic pricing, innovation volume growth, and market recovery. Cost of sales, distribution, and admin expenses increased by 46%, largely due to inflationary pressure and forex devaluation impacting imported materials. We also continue to invest behind our brands and categories and support the recovery of the market.”

Essaadi also disclosed that the company is in the process of initiating a rights issue to raise up to N600 billion in additional capital to restore the business to profitability and enhance operational and financial stability as part of its resilient and forward- thinking strategy.

“The funds raised will be used to eliminate our foreign exchange-denominated debts and reduce our local debts, thereby mitigating our exposure to the continuing economic challenges. Through our cost-saving and other efficiencies initiatives, we recorded a 34% increase in operating profit, signalling the resilience and strength of our operations,” he explained.

Essaadi  added that Nigerian Breweries remains aware of the ongoing challenging operating environment with double-digit inflation and diminishing consumer purchasing power. Nevertheless, he reassured stakeholders that the company is committed to focusing on its strategy, with a vision to deliver value to shareholders while making meaningful contributions to the country’s economic growth and development.