International Breweries suffered a foreign exchange loss of about N42 billion in the second quarter, which has swollen its N2.3 billion loss in the first quarter to N23.6 billion at half year.
This has further strained the company’s cost-income imbalance which is sustaining a stream of losses for the sixth year running. The brewing company built a net loss of N21.6 billion in 2022 – which it has already exceeded by half a year.
The company’s half-year unaudited financial report at the end of June 2023 shows some steps in improving sales and getting costs under check with a fair chance of breaking even at least.
The profit hopes however faded with the change in fortune from an unrealized net foreign exchange gain of N7.6 billion in the same quarter last year to the huge loss in the second quarter.
There is an upturn in sales from a drop of 5.4 percent in the first quarter to an increase of 15 percent to N61.7 billion in the second quarter.
Improving sales was supported by the easing of production costs which have been a major squeeze on earnings. Cost of sales grew by about the same margin as sales revenue in the second quarter compared to the first quarter when it rose by 10.3 percent against the drop in sales.
The favourable development changed the reading from a 43 percent fall in gross profit to N9.6 billion in the first quarter to an increase of 13.6 percent to N14.4 billion in the second quarter.
Management kept administrative and marketing expenses flat at N12.7 billion in the second quarter but the exchange loss changed the earnings story from a fragile improvement in operating activities to a massive swelling of pre-tax loss from only N32 million in the same quarter in 2022 to over N37 billion in the second quarter.
An income tax credit of N16 billion for the second quarter lowered the company’s net loss figure to N21 billion for the period.
The company’s six months position shows a turnover of N116 billion, which is a moderate improvement of N4.7 billion over the closing figure of N111.4 billion in the same period last year.
Cost of sales however grew close to three times faster with an increase of N13.3 billion to N92 billion over the same period. The cost-income imbalance slashed gross profit by N8.6 billion to stand at N24 billion in half a year.
With some headway in cost control, administrative and marketing costs went down by N2 billion to N22.7 billion with further strong support coming from a three-time jump in finance income to N6.4 billion.
That shows some progress from the first quarter position where gross profit was insufficient to meet administrative and marketing/distribution expenses.
However, driven by the foreign exchange loss, a drop of 37.6 percent in other expenses to N2.6 billion in the first quarter took a bad turn to a massive swelling from N2.4 billion in the same period last year to N35.9 billion in half a year.
The result is a huge operating loss of N34.7 billion at the end of half year operations, down from an operating profit of N5.4 billion in the same period in 2022. The figure is already well above the operating loss of N21 billion the company incurred at the end of last year.
The rapid growth of 128 percent in finance cost to over N13 billion added to the pressure during the period with net finance cost advancing by 88 percent to N6.7 billion at the end of June 2023.
International Breweries’ borrowings continue to grow from over N194 billion at the end of last year to N215.6 billion at the end of the first quarter and further to 361 billion at the half year in addition to lease liabilities of N13.6 billion.
The company closed half-year operations with a pre-tax loss of N41.4 billion, swelling from N4.1 billion in the first quarter and down from a pre-tax profit of N1.8 billion in the same period last year.
A tax credit of N17.8 billion erased a good part of the loss, leaving a net loss of N23.6 billion for shareholders in half a year.
The company closed the half-year operations with a loss of 88 kobo per share against earnings per share of 1 kobo in the same period in 2022.