Guinness Nigeria incurs N54.77bn  FY loss as Tolaram Plc acquisition draws closer

Business a.m.

Guinness Nigeria Plc has reported a N54.77 billion loss for the financial year that ended on June 30, 2024. The loss represents a 201 percent increase compared to the N18.17 billion loss the company incurred the previous year, marking a challenging financial period for the company as it awaits its takeover by Tolaram Plc following the sale of its parent company Diageo Plc’s majority shares.

The brewery giant also reported a  117.79 percent increase in net finance costs, which rose from N45.50 billion in 2023 to N99.09 billion in 2024. The increase in expenses had a significant impact on the company’s loss before income tax, which leaped to N73.68 billion from N22.14 billion the previous year.

Despite facing numerous obstacles, Guinness Nigeria Plc revenue saw a promising 31 percent increase from N229.44 billion in the previous fiscal year to N299.49 billion. In addition, the company’s profit from operating activities registered a nine percent increase, reaching N25.41 billion from N23.36 billion.

The rise in revenue was mainly attributed to the strategic repositioning of the product portfolio, which included introducing innovative offerings and adjusting pricing to counterbalance the increasing costs. Non-alcoholic malt, ready-to-serve beverages, and international premium categories demonstrated their resilience, registering significant growth compared to the previous year. To further engage with its customers and boost brand awareness, the company focused on amplifying its digital presence, hosting captivating activations, and expanding the visibility of its brands.

While Guinness Nigeria Plc reported a commendable growth in revenue for the financial year ending June 30, 2024, the financial performance was adversely affected by a significant increase in costs and financial charges related to foreign currency loans.

Guinness Nigeria Plc faced significant financial pressures during the financial year, as evident from the company’s report of a 129 percent increase in FX revaluation loss, amounting to N112.3 billion, compared to the N49.1 billion loss incurred in the previous year. The challenging environment, characterised by increased expenses, led to a decrease in the company’s overall financial health despite the growth in revenue.

Adebayo Alli, the managing director of Guinness Nigeria Plc, commented on the company’s financial performance, stating that the company is extremely proud of its team’s ability to deliver a strong financial performance amidst significant macroeconomic headwinds.

Alli admitted the impact of currency devaluation on Guinness Nigeria’s financial performance, noting that the spot rate moved from N759.03/$1 at the start of the year to N1,540/$1 at the end of the financial year, resulting in a an unrealised forex loss and a loss before tax of N73.68 billion. Despite these challenges, Alli reassured shareholders and stakeholders by stating the board is confident in the company’s well-crafted strategy.

“Our strategic focus on category mix optimization, innovative product offerings, and targeted price adjustments has been key to navigating these challenges and driving growth.

“Looking ahead, we are committed to our mission of transforming Guinness Nigeria with a strong focus on winning differently as we move into FY25. We will continue to leverage digital innovation, deepen our consumer engagement, and invest in our people and brands to ensure sustained growth and value creation for our stakeholders,” the Guinness Nigeria MD stated.

Omobola Johnson, the Chairman of the board of directors, Guinness Nigeria, reaffirmed the company’s dedication to regularly assessing its strategy against the challenging business environment to ensure it delivers returns to its shareholders and creates long-term value for all stakeholders.

Johnson added that the company’s  performance during the  year in review  demonstrates the resilience and adaptability of its business in the face of economic challenges.

Guinness Nigeria Plc’s financial challenges come at a crucial juncture, as the company experiences significant ownership changes. The exit of Diageo Plc, its longstanding parent company, signals the close of an important chapter in the company’s history. The relationship with Diageo has been instrumental in supporting and shaping many aspects of Guinness Nigeria’s business operations, including critical areas such as financial arrangements and market strategies.

Guinness Nigeria’s financials also reveal that the company had an outstanding loan balance of $22.5 million owed to its parent company, Diageo Plc. At the end of the 2023 financial year, this loan had a face value of N17.9 billion. However, due to currency devaluation, the value of the loan increased to N39.3 billion by the end of the 2024 financial year.

As part of its efforts to mitigate the risks associated with foreign exchange exposure, Guinness Nigeria employed a significant reduction in its letters of credit liabilities, which decreased by over 98 percent from N45.8 billion to N814 million. This substantial decline aligns with a broader shift in the strategies of Nigerian subsidiaries of foreign-based companies, which are increasingly utilizing intercompany loans to manage their foreign exchange needs. This approach has been favoured over traditional bank credits due to the more favourable terms offered by the parent companies.

Moving forward, industry experts suggest that Guinness Nigeria Plc will need to prioritize cost management and operational efficiency as key components of its recovery plan. The impending completion of the Tolaram acquisition presents an opportunity for the company to re-evaluate its market strategy and potentially identify new opportunities to drive growth and value for shareholders.