Q1 2023: Nigerian Breweries records N10.7bn loss amid poor revenue

Nigeria Breweries have recorded N10.7 billion loss in first quarter of 2023 amid poor sales revenue and rising costs

The brewing company has experienced heightened operating pressure for the past three quarters, having posted losses in the entire second half of last year.

The unaudited financial report of the company for the first quarter ended March 2023 shows that its net sales revenue went down by N14.5 billion or 10.5 per cent quarter-on-quarter to close at over N123 billion.

The loss of sales is against major cost increases that were led by a net foreign exchange loss of N14.5 billion in the first quarter – an upsurge from about N1.9 billion incurred in the same period in 2022.

Foreign exchange losses have been the major cause of the rising operating cost that has gulped earnings of the company since the third quarter of last year. Net foreign exchange loss had multiplied close to four times to over N26 billion in the 2022 financial year.

The speedy growth in net foreign exchange loss in the first quarter spelled an even more destabilising effect on earnings this year than in the preceding financial year.

Another major operating challenge is production costs that grew while sales dropped. At over N79 billion, input cost rose by N4 billion or 5.5 per cent, showing an increased cost per unit of sales from 55 kobo to 64.4 kobo over the review period.

That sent gross profit crashing down by N18.6 billion or 29.7 per cent quarter-on-quarter to less than N44 billion at the end of the first quarter.

Further pressures were experienced from both sides of cost and income. Other income dropped by 58.5 per cent to N356 million.

Selling and distribution expenses grew by 3.4 per cent to N33.7 billion while administrative costs rose by over 10 per cent to N8.2 billion.

There was also a net charge of N441.6 million on financial asset losses in the first quarter against a net write-back of N451.5 million in the same quarter in 2022.

The cost-income imbalance almost consumed the gross profit, slashing operating profit from N23.7 billion to less than N1.9 billion over the review period.

Further disappointments came from a drop in finance income against major swellings of finance expenses and net foreign exchange loss. The adverse developments built a net finance cost of over N19 billion – six and half times the net finance cost of less than N3 billion the company recorded in the same period last year.

The upsurge in net finance cost created a pre-tax loss of N17.4 billion at the end of the first quarter, plunging from a pre-tax profit of N20.8 billion in the same quarter in 2022.

The only cost saving in the quarter came from tax expenses that dropped from over N7 billion to a credit of N6.7 billion over the review period. That erased part of the pre-tax loss and left a bottom line still in the red to the tune of N10.7 billion at the end of the first quarter.

This was equally,x the story of the company at the end of last year when a drop of over 62 per cent in income tax expenses changed the reading from a drop of about 27 per cent in pre-tax profit to a little over N17 billion to a moderate increase of 4 per cent in after-tax profit to N13 billion.

Nigerian Breweries managed to keep recovery in motion for the second year in 2022 after three years profit drop hit N7.4 billion low in 2020. The strength for recovery appears completely broken with the first quarter loss and any upside force that could break the increasing loss momentum is yet to be seen.

The company ended the first quarter with a loss of N1.29 per share, down from earnings per share of N1.69 in the same quarter in 2022. It closed last year’s trading with earnings per share of N1.58 and paid a final cash dividend of N1.03 per share in addition to an interim cash dividend of 40 kobo per share.