Debts Rise, Finance Expenses Impact International Breweries H1 Profit

International Breweries Plc has returned to borrowing, and high finance costs and income tax expenses have impacted the half-year profit.

After shareholders bailed out the company from a huge debt overhang and foreign exchange losses in 2024, lease liabilities have remained high and are rising.

The company’s half-year financial report for the period ended June 2026 shows a sudden loss of the rising sales seen over the preceding two years, while huge finance costs that ceased last year are rearing their heads back to drain earnings once again.

Income tax expense is the biggest culprit among revenue-consuming expense lines, claiming more than all the increase in pre-tax profit and cutting net profit in the half-year from N41 billion to N38 billion year-on-year.

At the top of the challenges is the loss of sales revenue growth momentum for the second year.

Sales revenue closed flat at N342 billion year-on-year at the end of half-year operations, worse than a slowdown from 87.6 per cent growth in 2024 to 26.6 per cent growth in 2025.

The company’s years of losses were marked by slowly growing sales overtaken by cost increases, and whether management can steer operations away from a return to this pattern is a key development to watch.

As we observed in our analysis of the company’s 2025 full-year performance, “the ability to keep costs tamed will, however, be tested in 2026, as the company’s final quarter of 2025 ended in a loss”.

Lease liabilities are rising for the second year after doubling from less than N21 billion in 2024 to N42 billion at the end of 2025. Half-year operations ended with lease liabilities over N51 billion in June 2026.

Cost of finance grew by nearly 81 per cent year-on-year to more than N7 billion at half-year after dropping by 65 per cent to N12 billion at the end of 2025.

The good news is that finance income remains strong, increasing by 27.6 per cent year-on-year to almost N12 billion at half-year. Net financing result remains positive at N4.9 billion for the company despite declining from N5.4 billion in the same period last year.

Production cost savings helped to moderate the weakness in sales during the period. Cost of sales fell 8.5 per cent to N200 billion against flat sales revenue, enabling gross profit to increase by 16 per cent to N141 billion.

Cost savings of over N6 billion were achieved by reducing other expenses to N676 million, primarily due to the absence of foreign exchange losses this year.

The cost savings powered an increase of 24.7 per cent in operating profit to nearly N70 billion at half-year.

Despite higher finance costs, the company grew pre-tax profit by 21.6 per cent year-on-year to N74.8 billion at half-year.

However, a major increase of over 80 per cent in income tax expenses consumed the gains in pre-tax profit, resulting in a 7 per cent decline, which pushed after-tax profit to N38 billion at half-year.

The accumulated losses consumed the profit for the period, filling it up from a N191 billion deficit at the end of last year to negative N152.7 billion at half-year.

At the current rate of profit delivery, International Breweries isn’t likely to level up its retained deficit until the second quarter of 2028.

The company earned 23 kobo per share at the end of the half-year operations, down from 25 kobo per share in the same period in 2025.