Nigerian Breweries Plc incurred a net foreign exchange loss of over N85 billion at the half-year, which extended the company’s loss position from N10.7 billion in the first quarter to N47.6 billion at the half-year.
The second quarter of the brewer of Star, and Gulder Larger Beers accounted for N70.6 billion of the foreign exchange loss as well as almost N37 billion of the closing net loss for the half year.
The interim financial report for the half year ended June 2023 shows that the brewing company upturned sales in the second quarter and slowed down production costs but the gains in operating performance were claimed by the huge exchange loss.
Net sales revenue sprang from a drop of 10.5 percent to N123 billion in the first quarter to an increase of 13 percent to N154 billion in the second quarter.
The company’s management has also reversed the pattern of production cost growth while sales dropped, which happened in the first quarter.
Against the 13 percent growth in turnover in the second quarter, the cost of sales slowed down during the period at an increase of 7 percent to N85.7 billion, which improved margins in the quarter.
The result is an upswing in gross profit from a drop of about 30 percent in the first quarter to an increase of 21.6 percent to close at over N68 billion in the second quarter.
Also, operating profit has rebounded from a massive fall in the first quarter to register outstanding growth of 119 percent in the second quarter, closing at N26.5 billion for the quarter.
The big gain in operating results was however more than consumed by the huge net foreign exchange loss, throwing the bottom line into deep red.
Foreign exchange losses have been the critical factor undermining Nigerian Breweries’ earnings performance since last year. The company has been turning in losses since the third quarter of last year, as foreign exchange losses jumped about four times to over N26 billion at the end of the year.
The current year has seen the full-year foreign exchange loss of last year multiply well over three times in six months.
The company’s half-year earnings records show a turnover of N277.4 billion, which is a slight improvement from N274 billion for the same period last year. The upturn in sales in the second quarter was diluted by the drop in the first quarter.
The increase in production cost in the first quarter and the slowdown in the second quarter resulted in an increase of over 6 percent at half year to stand at N165 billion against the marginal improvement in sales revenue.
The incursion in sales led to a decline of 5.4 percent in gross profit to close at a little over N112 billion for the half year.
Operating profit dropped by a much wider margin of about 21 percent to N28.4 billion at the half year in reflection of the sharp drop recorded in the first quarter.
The most devastating event in the company earnings story is the foreign exchange loss that multiplied about 12 times year-on-year to N85.3 billion in the half year.
The rising cost of finance also added to the operating pressure, as it grew more than three and a half times to N11 billion at the end of June 2023.
Net finance cost swelled nine and a half times to over N96 billion over the same period, which consumed more than the operating profit and created a pre-tax loss of almost N68 billion at the end of the six months of operations.
Some relief came from an income tax credit of over N20 billion, which lowered after-tax loss to N47.6 billion, still down from an after-tax profit of N18.7 billion in the same period in 2022.
Loss per share amounted to N4.44 for Nigerian Breweries at half year, down from earnings per share of 64 kobo in the same period last year.
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