Nigerian Breweries Plc recorded about N4 billion loss in the third quarter that ended September 2022 and this slashed its bottom line from N18.7 billion at half a year to N14.7 billion at the end of the third quarter. The closing profit figure still delivers an impressive growth record of 79.5 percent year-on-year.
Will the company head off another loss in the final quarter or stay in the red to slash the full-year profit further is the caution on the brewing company, as the full-year earnings reporting season draws close.
The company’s interim financial report for the third quarter ended September 2022 shows that cost and income imbalance caused the loss in the third quarter. In the face of three major rising costs, revenues were insufficient to meet expenses in the quarter.
The cost increases in the quarter were led by net foreign exchange loss that jumped by 163 percent quarter-on-quarter to over N3 billion. Marketing and distribution expenses followed with an increase of about 31 percent quarter-on-quarter to N30.6 billion.
Also, the cost of sales rose by 24 percent to N83.6 billion in the quarter.
The costs grew well ahead of an improvement of 19.4 percent in net sales revenue to over N119 billion over the same period. This resulted in an operating loss of N452 million for the quarter, down from an operating profit of N4.8 billion in the same quarter in 2021.
In a statement, Uaboi Agbebaku, company secretary, blamed revenue weakness in the third quarter on seasonal volume decline due to pressure on consumer disposable income as well as heavy rains and floods. The cost increases, he said, were driven by inflation and increased energy cost.
The company’s foreign exchange loss is the key factor in a 53 percent jump in net finance cost quarter-on-quarter to over N6 billion. A pre-tax loss of N6.6 billion occurred in the quarter, dropping from a pre-tax profit of N797 million reported for the same period in the preceding year.
Management succeeded in pruning down the net loss figure to slightly below N4 billion with a tax credit of N2.6 billion at the end of the quarter.
While the third quarter loss broke the company growth momentum for the year, it still maintained its way towards recovery for the second year after three years of declining profit ended in 2020.
Nigerian Breweries experienced marked a turnaround in the 2021 financial year when it lifted profit a clear 72 percent to N12.7 billion. The strength of rebuilding profit remains quite good for the company at 79.5 percent growth achieved at the end of the third quarter.
The ability to maintain the growth momentum to the full year is uncertain, as the cost-income imbalance seen in the third quarter may persist in the final quarter. However, a stronger final quarter may be expected on the side of revenue even as cost increases can also be expected to remain.
The company’s year-on-year reading shows net sales revenue of N393.4 billion, which is an increase of 27 percent year-on-year but a slowdown from 31 percent at the half year. The company’s upside force lies in improving sales – which may get a forward push by seasonal sales in the final quarter.
At about N239 billion, the cost of sales grew by 20 percent and gross profit slowed down from over 52 percent growth at half year to less than 40 percent increase to N154.5 billion at the end of the third quarter.
Marketing and distribution expenses grew well ahead of sales at 46 percent year-on-year to N101 billion but administrative costs maintained a moderated increase at 17.4 percent to N20.6 billion at the end of the third quarter.
Operating profit slowed down from 80 percent growth at half year to 43 percent to N35.4 billion at the end of September 2022.
Net foreign exchange loss – the leading cost increase for the year amounted to N10.4 billion at the end of the third quarter, an increase of 135.5 percent year-on-year. The company’s borrowings stood in the region of N114 billion at the end of September 2022, rising from N31.4 billion at the end of 2021.
The company earned N1.82 per share at the end of the third quarter from which an interim cash dividend of 40 kobo per share has been paid to shareholders.
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