Nigerian Breweries Plc, is the pioneer and largest brewing company in Nigeria may have found sustains way as its elevated earnings performance in the first and second quarters showed a renewed strength in profit performance this year has strengthened further. The brewing giant which closed last year’s trading with profit down to the lowest figure in many years. The company has found a new strength this year good enough to make up for last year’s weakness and expectedly lift profit to a new high.
Amehnews recalled that the company closed the 2016 operations with a net profit of N28.41 billion, a drop of 25.4% and a sustained profit fall for the third year in a row. But at the end of the second quarter of the current year, the company posted an after tax profit of N23.75 billion, a year-on-year growth of 25% – accelerating from the 9.5% increase in the first quarter.
NB with Johan Antonie Doyer as a new Managing Director/CEO and the company’s full year profit outlook improved from the prospects seen at the end of the first quarter. We mark up full year profit projection from N44 billion earlier indicated to N47.5 billion for Nigerian Breweries at the end of 2017. That will be an outstanding growth of over 73% from the 2016 profit figure. The company is expected to beat its 2013 peak profit figure of a little over N43 billion for the first time this year.
Inability to grow sales revenue in the face of rising costs was the company’s problem in 2016 and major cost increases were led by interest expenses, which eroded profit margin in the year. The company has overcome these challenges so far this year. Revenue is headed for the strongest growth in five years and interest expenses have continued to drop.
In six months the company’s turnover grew by 18% due to the impact of price increases implemented in the previous year. Cost of Goods Sold increased by 25% as a result of higher input costs. Nevertheless, due to a continued focus on cost efficiencies, the Results from Operating Activities rose by 7% while Profit After Tax increased by 9% helped also by lower Net Finance Charges.
The company ended half year operations with sales revenue of N181 billion, a year-on-year growth of 15%. Prospects remain quite good for an accelerated revenue growth at full year. The turnover projection of N367 billion for Nigerian Breweries in 2017 is unchanged, indicating an increase of 17% at the end of the year.
Interest expenses that hurt profit margin last year have changed direction this year, dropping by 38% at the end of the second quarter. This reflects a drop of 23.5% in long-term loans and borrowings – which amounted to N13 billion at the end of June.
Cost of sales has however continued to grow ahead of sales revenue at 19.5% compared to 15% at the end of the second quarter. That reduced gross profit margin from 47% in the same period last year to 44.9% at the end of half year.
As was the case in the first quarter, the company could not save any cost from marketing/distribution expenses – which continues to grow virtually at par with sales revenue at 15.3% to N33.40 billion. A compensating move came from administrative cost, which declined by 3.8% to N10.44 billion during the period. This enabled the company to improve operating profit by close to 16%, a significant improvement from 6.7% increase in the first quarter.
A major development for the company in the second quarter was that revenue grew ahead of costs, reversing the position in the first quarter. It therefore improved profit margin during the period compared to a decline in profit margin in the first quarter. Net profit margin increased from 12.1% in the same period last year to 13.1% at the end of half year.
The company earned N2.97 per share at half year, improving from N2.40 per share in the same period last year. The full year outlook indicates earnings per share in the region of N6 for Nigerian Breweries in 2017. It earned N3.58 per share at the end of 2016 and paid out an interim dividend of N1 per share and a final of N2.58 per share.
According to the results, the management said the 2017 operating environment however remains challenging. The Board is confident that the Company is in a good position to make the necessary adjustments to cope with the difficult operating environment. Thus, the Company will continue to pursue its twin-strategy of Cost Leadership and Market Leadership supported by innovation to delivers good return to its esteam shareholders.