International Breweries is on the sixth year of streaming losses, closing with a net loss of N2.3 billion in the first quarter. It is a worse start for the company this year than in 2022. It began 2022 with a profit of N721 million in the first quarter and yet ended with a net loss of N21.6 billion for the year.
The first quarter interim financial report of the brewing company at the end of March 2023 shows a lingering problem of cost-income imbalance that leaves no room for profit. The company is losing sales while costs are on the rise.
General industry contraction and supply chain constraints are to blame. Poor sales seen last year have worsened to a drop in the first quarter while inflationary pressure keeps jerking up costs.
Sales revenue went down by N3.1 billion or 5.4 percent year-on-year to N54.4 billion at the end of the first quarter. This is worse than the slowdown in sales in 2022 from over 33 percent in 2021 to less than 20 percent to close at roughly N219 billion.
While turnover grew by over N36.4 billion in 2022 yet a loss of about N22 billion occurred. The prospects are therefore high for an even bigger loss for the company with falling sales this year.
In five years to 2022, International Breweries has built losses every year summing up to N87 billion, which threw retained earnings into a deficit of over N58 billion at the end of 2022, rising further to N60.6 billion at the end of the first quarter.
Production costs presented a major squeeze on earnings this year, as it grew by N4.2 billion or 10.3 percent against the drop in sales. That slashed gross profit by as much as 43 percent year-on-year to N9.6 billion in the first quarter.
This represents a widening margin by which the cost of sales is growing well ahead of sales revenue. Gross profit had dropped by less than 6 per cent to N43.6 billion at the end of last year.
The gross profit figure for the quarter was insufficient to meet administrative and marketing/distribution expenses of almost N10 billion.
Despite a drop of 37.6 percent in other expenses to N2.6 billion, an operating loss of almost N3 billion was registered in the first quarter. The company ended last year with an operating loss of N21 billion mostly incurred in the final quarter.
A breathing space for the company came from robust growth of 128 percent in finance income to N3.4 billion in the first quarter. This was however more than consumed by finance costs which grew by 36.6 per cent over the same period to N4.6 billion.
Net finance costs of N1.1 billion were recorded at the end of the quarter. This is a drop from N1.8 billion in the same period last year. This represents a favourable change of direction from a high jump of 208 percent in net finance expenses at the end of 2022 operations.
A pre-tax loss of N4.1 billion was recorded in the first quarter, down from a pre-tax profit of N1.8 billion in the same quarter last year.
A tax credit of N1.8 billion lowered the company’s net loss to N2.3 billion for the first quarter.
International Breweries’ borrowings have increased further from over N194 billion at the end of last year to N215.6 billion at the end of the first quarter in addition to lease liabilities of close to N16 billion.
The company closed the first quarter trading with a loss of 9 kobo per share against earnings per share of 3 kobo in the same quarter in 2022.
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