GUINNESS Nigeria Plc Posts Loss Due to Higher Finance Charges, Revenue Growth Moderates

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Guinness Nigeria Plc (GUINNESS), a prominent brewer in Nigeria, published its audited results for the fiscal year 2023 after market close on 27 July, revealing a challenging financial performance. The company reported a loss per share of NGN8.29 for the year, a sharp decline from the earnings per share (EPS) of NGN7.15 recorded in the previous year (2022FY). The negative outcome was primarily attributed to higher net finance charges, which had a significant impact on the brewer’s bottom line.

Despite the tough operating environment, GUINNESS managed to achieve revenue growth of 10.9% year-on-year (y/y) in 2023FY, albeit at a slower pace compared to the previous year’s growth of 28.9% y/y. Management attributed this revenue growth to strategic pricing initiatives across various categories, including Stout, Ready-to-Serve, and Mainstream Spirits. These price adjustments were implemented to counter the effects of cost inflation and to position the company’s product mix effectively. On closer examination, it was found that GUINNESS increased prices by approximately 18.3% during the year, with a larger proportion of the increase observed in the Stout category (about 26.5%). Additionally, on a quarter-on-quarter basis, revenue expanded by 5.4%, supported by higher pricing during the period.

Despite the revenue growth, the gross profit margin contracted by 108 basis points (bps) y/y to 34.1% in 2023FY, compared to 35.1% in 2022FY. This decline was primarily driven by a 12.8% year on year increase in the cost of sales, which outpaced the revenue growth for the year. The company faced cost pressures arising from the double-digit inflationary environment, currency depreciation, and foreign exchange (FX) illiquidity, which collectively contributed to the higher cost of sales.

In line with GUINNESS’ strategic focus on growth, operating expenses rose by 14.0% y/y in 2023FY, though this was a moderation compared to the substantial 40.3% y/y increase in the previous year (2022FY). As a result, both EBIT (earnings before interest and taxes) and EBITDA (earnings before interest, taxes, depreciation, and amortization) margins settled lower at 10.2% and 14.3%, respectively, reflecting the impact of higher operating expenses on profitability.

The most significant driver of the overall loss in 2023FY was the surge in net finance costs, which increased by an astounding 201.4 times y/y to NGN45.50 billion. This significant rise was primarily due to a 24.0 times y/y increase in finance costs, reaching NGN53.29 billion. A major contributing factor to the higher finance costs was an unrealized FX loss of NGN49.10 billion, which was substantially higher compared to NGN1.43 billion in 2022FY. This FX loss resulted from various factors, including the remeasurement of other foreign currency balances, increased exchange differences on foreign currency letters of credit, and foreign currency intercompany loans.

As a consequence of these challenges, GUINNESS reported a loss before tax of NGN22.14 billion in 2023FY, contrasting with the profit before tax of NGN23.67 billion achieved in 2022FY. After accounting for a tax credit of NGN3.97 billion, the net loss for the year came in at NGN18.17 billion, representing a significant decline from the net income of NGN15.65 billion reported in 2022FY.

In light of the results, GUINNESS is scheduled to hold a management conference call on 4 August 2023 at 01:00 PM to discuss the performance and the strategies moving forward.

Despite the challenging economic and regulatory environment, analysts remain cautiously optimistic about GUINNESS’ prospects. The company’s strategic focus on optimizing its product mix, pricing strategies, and distribution channels may help offset some challenges. However, GUINNESS is expected to face headwinds from weak consumer spending, unfavorable regulations, and currency devaluation. Industry experts are closely monitoring the brewer’s efforts and will review their estimates accordingly.


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