N60bn Loss In Q1 Dries Up International Breweries’ Shareholders’ Funds

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International Breweries Plc incurred a N60.4 billion loss in the first quarter, shrinking the company’s equity capital from over N115 billion to N5 billion in losses that have run for seven straight years.

 

At the current rate, the company could build the biggest loss ever this year as the company’s first-quarter financial report at the end of March 2024 shows that the loss incurred in the first quarter is already well more than the N55.4 billion preceding two years of losses combined and stands at half of the N120.8 billion six years of losses to 2023 put together.

 

Losses have kept on, eating up the company’s equity resources after recapitalisation in 2020 from N151.7 billion to N117 billion at the end of 2023. With the loss in the first quarter, retained losses have swollen from N128 billion at the end of 2023 to almost N189 billion at the end of March 2024. That has consumed much of the shareholders’ funds, leaving less than N5.4 billion – which may disappear in the event of a further loss in the second quarter.

 

The loss driver is again, the net foreign exchange losses – which multiplied more than 34 times year-on-year from N2.7 billion to N92.4 billion at the end of the first quarter, and it is already far more than the net foreign exchange loss of N72 billion for the 2023 full year that led the loss of N33.8 billion the company posted at the end of the year.

 

The foreign exchange losses are quite clouding the progress the company’s management is making in pushing sales.

 

International Breweries attained a milestone in sales growth at an increase of almost 90 per cent year-on-year in the first quarter to over N103 billion – the biggest quarterly sales delivery in years. However, pressure from production costs exceeded the force of revenue growth with input cost advancing by 99 per cent to over N74 billion at the end of the first quarter.

 

Notwithstanding the pressure from production costs, the company achieved a strong growth in gross profit at 69 per cent to the region of N29 billion. It kept administrative, marketing and distribution expenses under control at an increase of 26 per cent to about N22 billion, which could have made operating profit possible had it not been for the foreign exchange losses.

 

Driven by foreign exchange losses, other expenses swelled from N2.6 billion to N87.6 billion over the review period, creating a huge operating loss of N80.6 billion at the end of the first quarter. Adding to the pressure are the company’s financing results where financing income dropped but finance expenses grew.

 

At about N860 million, finance income is down by 75 per cent year-on-year while the cost of finance more than doubled at 110.5 per cent to N9.6 billion. Net finance income multiplied nearly eight times to N8.8 billion at the end of the first quarter.

 

The company’s borrowings have continued swelling from N194 billion in 2022 to N374 billion at the end of 2023 and, further, to N474 billion at the end of March 2024, excluding lease liabilities. The result of huge foreign exchange losses and swollen net finance cost is a pre-tax loss of N89.4 billion at the end of the first quarter, about 22 times the N4 billion loss in the same period last year.

 

A tax credit of almost N29 billion erased part of the loss and left the bottom line in the red at N60.4 billion at the end of the first quarter, more than 26 times the net loss of N2.3 billion in the same quarter last year.

 

The company ended the first operations with a loss of N2.25 per share against a loss per share of 9 kobo in the same period in 2023.