International Breweries Plc is back into a loss of N385 million in the second quarter after a profit of N721 million in the first quarter raised a flicker of hope for an upswing. It is nevertheless some progress for the brewing company in cutting down from a loss of over N11 billion in the same quarter last year.
The company’s interim financial report for the half year ended June 2022 shows four favourable developments that enabled the big slash of the loss figure over the period.
The main factor is a huge cost saving in other expenses, which shifted from as much as over N11 billion in the same period in 2021 to other income of N1.7 billion in the second quarter of the current financial year. The cost saving induced a major rebound from an operating loss of N13.5 billion to an operating profit of N1.7 billion over the same period.
The second high point for the company is strong growth of over 25 per cent in sales revenue quarter-on-quarter to roughly N54 billion in the second quarter. The third favourable factor is a moderated growth of 9 per cent in input expenses to N37 billion for the second quarter.
Outstanding growth in finance income from N137 million to over N691 million topped up the positive functions of the company’s earnings story in the second quarter.
A combination of growing sales revenue and slowing cost of sales powered gross profit for the company in the second quarter, which jumped by 86 per cent quarter-on-quarter to N16.6 billion.
Two major cost increases however stood in the way of converting the gain in gross profit into the bottom line. These include administrative/marketing expenses, which rose by 47.5 per cent quarter-on-quarter to N16.6 billion. This consumed the entire gross profit for the period.
The second rising expense line is finance cost, which jumped from N269 million in the same period last year to N2.4 billion in the second quarter. That multiplied net finance cost more than 13 times over the period to N1.7 billion at the end of the quarter.
A resulting pre-tax loss of N32 million was swelled by a tax expense of N353 million to close at a loss of N385 million for the second quarter.
The half-year earnings reading for the company shows a turnover of N111.4 billion, which is a strong year-on-year growth of 36 per cent. This is strengthened further by a slowdown in the cost of sales at an increase of 12.4 per cent over the same period.
Growing sales and moderating cost of sales yielded a robust increase in gross profit at 137.4 per cent year-on-year to N36.6 billion at the half year. Administrative and marketing expenses however grew well ahead of sales revenue at 42 per cent to N28.7 billion and claimed a good part of the gross profit.
A drop of 78.8 per cent in other expenses to N2.4 billion helped to lift operating results from a loss of N16.4 billion in the same period last year to an operating profit of N5.4 billion in the half year in June 2022.
A big gain in finance income from N137 million to N2.2 billion over the period was equally followed by an upsurge in finance cost by more than six times to N5.8 billion.
Net finance expenses, therefore, grew by more than four folds to N3.6 billion. The company carries balance sheet debts in the region of N111 billion in addition to lease liabilities of over N9 billion.
The resulting pre-tax profit of N1.8 billion for the company was largely claimed by a tax expense of N1.5 billion, leaving N336 million for shareholders at the end of half-year operations. This still represents some progress from an after-tax loss of almost N14 billion in the same period last year.
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