By Folakemi Emem-Akpan
Both companies are in the brewing subsector of the Nigerian economy and between them account for more than 70 per cent of the Nigerian brewing industry. Nigerian Breweries is the bigger of the two companies, surpassing its contemporary in terms of sales, profit retention, assets deployed as well as equity employed.
It was also ahead of its competitor in terms of performance for their 2017 review year. Of the seven profitability ratios examined, Nigerian Breweries led in four while Guinness led in three.
Turnover growth rate
For the 2017 financial year, Nigerian Breweries was able to advance its gross earnings, such gross earnings rising to N344.6 billion from N313.7 billion in the preceding year. Analysis shows that this translates to a growth rate of 9.9 per cent, as compared to Guinness’s turnover growth rate of 23.4 per cent for the same period under review. Analysis shows that while both brewing companies made a progress for the year under review, Guinness was the winner in this respect.
Pre-tax profit growth rate
Both breweries recorded growth in the level of pretax profit for the 2017 financial year, but Nigerian Breweries’ profit growth was milder than that of Guinness, also making Guinness the winner in this respect. Nigerian Breweries’ profit stood at N46.6 billion, 17.7 per cent more than the N39.6 billion recorded in the prior year. Meanwhile, Guinness recorded a pretax profit of N2.6 billion, a marked departure from its loss of N2.35 billion in the erstwhile year. It thus had a pretax profit growth rate of 210.6 per cent, making it the winner in this respect.
Not only did Nigerian Breweries record higher gross earnings and pre-tax profit than Guinness did, it was better able to translate its turnover to profit. For the 2017 financial year, pre-tax profit margin (which measures a company’s ability to squeeze as much profit as is possible from turnover) for Nigerian Breweries was 13.5 per cent, higher and better than Guinness’ result. Guinness had a profit margin of 2.1 per cent, meaning it made N2.10 on every N100 income earned, as compared with the N13.50 Nigerian Breweries made on every N100 income earned.
ROE and ROA
Working with shareholders’ funds valued at N178.3 billion, Nigerian Breweries was able to record a return on equity of 18.5 per cent, up from 17.1 per cent recorded in the preceding year. This 18.5 per cent ROE is as compared to and better than Guinness’ ROE for 2017 which stood at a mere 4.4 per cent.
Analysis shows that while every N100 worth of equity deployed by Guinness earned it N18.50 in after-tax profit, such N100 equity deployed earned Nigerian Breweries a profit of N4.40.
Return on assets followed a similar pattern, with Nigerian Breweries recording a higher return than Guinness did. While Nigerian Breweries had a return on equity of 12.2 per cent, Guinness had an ROA of 1.8 per cent.
Earnings per employee
For the 2017 financial year, Nigerian Breweries recorded an earnings per employee of N103.5 million. Meanwhile Guinness’s employees contributed N132.4 million on the average to the company’s earnings, making Guinness the winner in this regards.
This was another ratio in which Nigerian Breweries came out tops. As a ratio, this should be kept as low as possible without compromising quality. Nigerian Breweries had a ratio of 25.7 per cent and this was lower and better than Guinness’ 31.2 per cent.
A point to consider
It is important to note that the 2017 financial year was not a better one for Guinness Nigeria Plc on many levels. It was better able to control its finance cost and turned out a profit rather than a loss like it had in the prior year. Despite its ability to turn a profit, its results were however not still as good as those of Nigerian Breweries.