International Breweries Plc managed to escape another loss in the third quarter with a tax credit of N657 million for the quarter. That erased a pre-tax loss of N289 million for the quarter and left an after-tax profit of over N367 million.
The profit for the quarter scratched the company’s net loss of N14 billion at half a year, trimming it to N13.5 billion at the end of the third quarter operations in September 2021. This is still already ahead of the full-year loss record of N12 billion the company posted at the end of the 2020 financial year.
The brewing company has been running at losses since 2018, as operating pressures persist. However, there appears to be a considerable headway for the company in improving its cost-income balance in the third quarter compared to the same quarter in 2020.
Sales revenue was up by a clear 32 per cent quarter-on-quarter to N46.4 billion in the third quarter. Improving sales revenue is a sustaining positive signal for the company this year, showing the strongest revenue growth in three years.
Sales revenue accelerated from 10 per cent in the first quarter to 70 per cent quarter-on-quarter in the second quarter and further to 32 per cent in the third quarter.
The strong growth in sales revenue is further boosted by a moderated growth in the cost of sales in the third quarter – which grew by one-half as fast as sales revenue. That lifted gross profit by 111 per cent quarter-on-quarter to N12.6 billion for the third quarter.
The gross profit for the quarter represents 45 per cent of the closing gross profit of under N28 billion for the company at the end of its nine months of operations.
Administrative and marketing expenses also moderated at an increase of 20 per cent quarter-on-quarter and other expenses declined over the same period. The developments led to a turnaround from an operating loss of about N4.9 billion in the same quarter last year to a moderate operating profit of N209 million in the third quarter of 2021.
Further positive development for the company is an upturn in finance income from only N15 million in the corresponding quarter last year to N451 million at the end of the third quarter this year. The bad news that followed is that finance expenses of N950 million for the quarter consumed the earnings and left a pre-tax loss of N289 million for the third quarter.
The company’s year-on-year numbers at the end of the third quarter trading in September 2021 show sales revenue of over N128 billion, which is an increase of 34 per cent year-on-year.
Growing sales revenue remains a positive development for International Breweries this year compared to a marginal increase of 3 per cent in 2020. At the current growth rate, the company remains on course to achieving the strongest revenue improvement in three years in 2021.
The company’s management maintained the moderated position of input cost it achieved in the second quarter. Cost of sales again grew well below sales revenue at the end of the third quarter at 25 per cent year-on-year to N100 billion compared to 34 per cent growth in turnover.
With sustained moderation of cost of sales, gross profit registered a top record growth of 80.7 per cent year-on-year at the end of the third quarter, accelerating from 62 per cent growth at the half-year.
There is a further reduction in the proportion of sales revenue claimed by the cost of sales from 84 per cent in the same period last year and from 81 per cent at half-year to 78 per cent at the end of the third quarter.
Despite the strong growth in gross profit over the period, the figure was insufficient to meet administrative and marketing expenses of over N32 billion at the end of the third quarter. Further clouding the outlook is a huge exchange loss of N11.5 billion at the end of September.
With a moderate operating profit realised in the third quarter, the nine-month position shows a slight decline in operating loss at N16 billion, a marginal increase of 2 per cent year-on-year compared to nearly one-half increase at the half-year.
Finance expenses maintained the downward movement that began in the first quarter with year-on-year drops of 30 per cent in the first quarter, 58 per cent at half-year and 40 per cent at the end of the third quarter operations.
Finance income continued on the downside as well but net finance cost doubled its margin of decline from 14 per cent at half-year to 28 per cent to N1.3 billion at the end of the third quarter.
International Breweries closed the third quarter operations with a pre-tax loss of N17.5 billion, a slight decline year-on-year, reversing an increase of 44 per cent at the half-year.
An income tax credit of N4 billion at the end of September lowered the net loss figure to N13.5 billion. This is an increase of 24 per cent in the company’s loss figure over the review period, down from a 48 per cent increase at the half-year.
The company closed the third quarter operations with a loss per share of 50 kobo, rising from 40 kobo loss per share in the same period in the 2020 financial year.
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