Guinness Profit Dips Despite 1% Revenue Growth.
UMORU ABDULKADIR
Guinness Nigeria Plc has announced a marginal one percent increase in revenue in its first-half result
The result filed to the Nigerian Stock Exchange (NSE), showed that the Company’s revenue grew from N67.80 billion in the same period of 2018 to N68.33 billion, representing a meagre 1 per cent growth.
However, the Cost of Sales for the period rose by 2.48 per cent to N48.47 billion compared with N47.30 billion incurred in the corresponding period of 2018. This impacted the Gross Profit to drop to N19.85 billion from the N20.49 billion in the current period, representing a 3.14 per cent decrease.
The beverage and alcohol manufacturer recorded a 23.52 per cent decline in its operating profit during the period under review due to increases in Marketing & Distribution Costs, Administrative charges as well as 92.27 per cent rise in net finance cost from N845.37 million in the half-year period of 2018 to N1.63 billion in the corresponding period of 2019.
Similarly, its profit before tax (PBT) for the period declined by N1.9 billion or 49 per cent from N3.79 billion in 2018 to N1.93 billion in the just ended period, while the Profit After Tax (PAT) fell by N1.08 billion to N1.32 billion from N2.58 billion in 2018.
A further breakdown of the account, shows that its Earnings Per Share (EPS) for the period dipped 49 per cent to 60 kobo from N1.18 of the same period of 2018.
However, the 1 per cent growth in revenue comparable period as strong growth in the second fiscal quarter mitigated the decline from the first quarter. Growth was mainly driven by strong double-digit growth in Brand Guinness and mainstream spirits. Together with the growth in the RTD segment, this mitigated the impact of increased excise duty, and the impact of reduced exports on malts.
The cost lines grew in low single digits as improved productivity and volume-driven cost absorption mitigated inflationary pressure. The Company’s marketing increased as it continued to focus on growing brands in line with the strategy.
Similarly, the operating profit declined by N1.1bn mainly due to the impact of the excise duty increase while the N1.9 billion decrease in PBT was driven by an increase in net financing costs related to short term loans.
Commenting on the results, Managing Director.CEO, Guinness Nigeria Mr. Baker Magunda, said, “In the half-year ended 31st December 2019, Guinness Nigeria delivered results that reflected a very strong second fiscal quarter performance despite continued regulatory, competitive and inflationary challenges in the operating environment. Strong growth in Guinness, spirits and RTDs together with cost-benefit from various productivity initiatives has helped to mitigate other risks.
I am pleased that revenue growth is in line with our strategy driven by better commercial execution and innovations. Within the period, we continued activating several innovations such as Guinness Smooth, Guinness Gold, Baileys Delight, Orijin Gin, Singleton and Johnnie Walker Green label. These have contributed significantly to the growth. Despite the increase in excise duties on beer and mainstream spirits, the competitive environment was such that there was lack of pricing opportunities in the period to mitigate this.”
“Looking forward, we will continue to drive our strategy which has a deliberate focus on key categories, growing spirits faster, continuing to innovate to meet consumer needs, and driving productivity. Whilst we are conscious of the continued challenging operating environment with double-digit inflation and pressured consumer spending, we are positive about the execution of our strategy for the remainder of the 2020 financial year. We remain confident of the resilience of our Total Beverage Alcohol portfolio strategy as a key driver of sustainable growth in the market”, he added.
While also commenting on the rather poor results, Mr. Babatunde Savage, Chairman of the Board of Guinness Nigeria Plc, said, “The Board is confident that our strategy is sound, and we are making the right investments in the company and brands to ensure long term competitiveness”. He further stated that “the Board continues to support the Management in its efforts to build a business that aims to consistently deliver growth for stakeholders.
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