" /> Guinness Plc: Poor quarterly results, year-end  jitters | Hallmarknews
Published On: Tue, Sep 6th, 2016

Guinness Plc: Poor quarterly results, year-end  jitters

Year to date, the company’s price has tumbled 22% dropping from N120.40 in January to N94.00 in September 2016.

Year–on-year, the brewer has seen its share price slide 21.53% from N116.00 to last week’s temporary support price of just over N90.00.

Investors’ migraine has been worsened by the fact that there has been no reason to believe that the lager maker will see a strong reversal in its fortunes anytime soon as its premium brands, Guinness Stout and Harp lager beer continue to lose market share.

Against this background, investors are agitated as all signs are pointing to the fact that the end of year results of the company which is expected to be released soon will be nothing to smile home about.

Before now, Guinness Nigeria Plc had recorded a decline of 83 per cent profit before tax (PAT) in its unaudited third quarter financial report for the period ended March 31, 2016.

The third quarter result showed weaker key headline items as revenue slipped by 18 per cent to N69.6 billion from N84.8 billion in 2015.

Also, the brewer’s pre-tax and after- tax profits also fell by 83 per cent from N1.2 billion to N864 million.

The company’s cost of sales however tumbled by 12.6 per cent from N45 billion in 2015 to N39.4 billion in 2016 (a good sign of managements cost containment efforts), but gross profit declined by 23.8 per cent to N30.3 billion from N39.7 billion while finance income rose 40 per cent to N946 billion.

While the company has blamed the shrinking economy which saw a sharp fall in the price of crude from $114 per barrel in June 2014 to $32 before the end of 2015 as a principal cause of lower domestic demand for its products, independent analysts claim that part of the company’s problem is a palpable loss in market share due to a growing bargain basement market for beer. Premium beer brands are increasingly losing space on the average consumers shopping list as cheaper brands create greater spending flexibility in the face of a biting recession.

The breweries sector of the stock market has been deeply challenged since 2013 and is suffering a decline.

This, many believe, is hurting sales volume and squeezing margins for all the operators.

Low consumer spending has also been fingered for its challenges. Among the troubles of the industry is rising consumer prices and the growing volumes of unpaid workers’ salaries in both the public and private sector, in addition to increasing unemployment. Stiffer competition within the sector also seems to increase the cost of sales now than previously.

Interestingly, the company lost 18% of sales revenue on year-on-year basis at the end of the third quarter in March 2016 and closed the period with a turnover of N69.62 billion.

The company whose drift South became more serious in the first quarter of 2016, had suffered a 76% profit decline in Q1,

After announcing a net revenue of N70bn for the 9months period ended 31st March 2016, Managing Director/Chief Executive Officer, Mr. Peter Ndegwa, observed: “Third quarter sales were impacted by a tough operating environment and the lapping of a very strong quarter in the previous year – particularly with distribution gains for the Orijin brand. The economic slowdown and rise in inflation continue to cause a shift towards lower margin value products.

However, we are starting to make progress in the broadening of our portfolio and also seeing resilience in our core brands. We are also focused on driving efficiency throughout our operations to address the continuing pressure on margins. We anticipate that the year will be challenging as we incurred one-off costs to reshape our business and continue to broaden our portfolio in order to drive future growth.”

Analysts are almost sure that Guinness Nigeria will not be able to post a better performance in the current year 2016 than the results of the period ended June 2016. Some of them have hinged their fears on the unfavourable operating environment, especially the prevailing economic recession.

A Lagos based analyst, Mr. David Adonri, Managing Director of High-Cap Securities ltd, told Business Hallmark that Guinness Nigeria has not been posting impressive results for some time now. He explained that posting strong performance was even more difficult in an economy in recession. ”I doubt the company can post stronger performance than last year”, he said.

The President, Association of StockBrokers Houses of Nigeria, Mr. Emeka Madubike believes that nobody can accurately predict the future performance of any company, he expressed reservation over what to expect in the soon-to-be-released results of Guinness Nigeria Plc.

The company had for the period ended 30th June 2015 reported 9% increase in net sales during the year.

The results then reflected strong volume growth on the back of year-on-year impressive performance of its innovation and value brands.

Ndegwa had said at that time: “We delivered a 9% increase in net sales during the year in a tough trading environment largely driven by the growth in our RTD category and value beer segment. Our gross profit also grew by 9%.

During the year, we continued to invest significantly behind our brands and our route to consumer expansion and these, together with the high interest environment, have driven a profit before tax decline of 8%”.

This performance had prompted the declaration of a gross dividend pay-out of approximately N4.82 billion in respect of the year ended 30 June 2015, that is, 320 kobo per 50kobo ordinary share.

The Company which has a strong portfolio of alcoholic and non-alcoholic beverages such as Guinness Foreign Extra Stout, Guinness Extra Smooth, Malta Guinness, Malta Guinness Low Sugar, Harp Lager, Smirnoff Ice, Satzenbrau Pilsner Lager, Dubic Lager, Snapp, and Orijin appear to have failed to harness their potentials to deliver strong performance.

Guinness’ third quarter results in 2015 also showed an increase in turnover from N78.018 billion in the preceding year to N84.750 billion, translating to an increase of +9.00%. However, its profit before tax (PBT) fell by -9.00% to N7.134 billion from N7.823 billion in the preceding year.

The slide in PBT was due mainly to increase in net interest expense and a depreciation of -3% of other income streams. Similarly, its profit after tax (PAT) slides significantly from N5.943 billion previously to N5.216 billion, a decrease of -12%. It is interesting to know that the downward trends are expected since the fourth (4th) quarter is usually the strongest quarter for the company. Earnings per share also depreciated by -12% to 346 kobo from 395 kobo previously.

On the flip side though, Guinness Nigeria also recently acquired the right to distribute Diageo Plc’s international Premium Spirits (IPS) brands in Nigeria in December 2015.

The company also announced the acquisition of the right to distribute McDowell, a United Spirits Limited brand in January 2016. These acquisitions fill the gaps in the spirits brand base of Guinness Nigeria, allowing it to compete across all categories of the alcoholic beverage market in Nigeria thereby deepening its operations and boosting its balance sheet growth potential in 2016 and beyond.

Despite the brewery industry’s weakness, Guinness Nigeria’s performance recently is a far cry from the better numbers and key performance metrics that its leading competitor, Nigerian Breweries has since churned out.

Brand performance

In the last five years, Guinness performance has been on a steady slide which was halted by its introduction of Orjin, a herbal drink in 2013. Orijin was like a shot in the arm for the beleaguered brewer.

It’s sparkling performance helped to save the company before the renewed trend of decline. Within three years in the market, the brand won a sizable chunk of the bottled herbal drinks market. According to a marketing research company, Nielsen Nigeria, Orijin controls over 50 percent market share of the market. However, while Orijn soared, the performance of other brands in the company’s brand portfolio flagged.

Although industry observers may argue that Guinness’ challenges may not be unconnected with its mono -product culture which focuses on its flagship brand, Foreign Extra Stout, the reality is that the company has not been very lucky with innovations (except for Orijin of course). its attempts to broaden its offerings have not been as successful as efforts by its arch rival, Nigerian Breweries.

Although older brands such as the Foreign Extra Stout, introduced in 1962),Harp, Malta-Guiness  have weathered fierce competition with more than a few bruises, latter additions like Harp Lime, Gordon’s Spark and Armstrong Black Lager have not fared as well.

Even latter arrivals such as Dubic Extra Lager, launched in April 2012 and SNAPP, born in September 2012 are yet to make impressive inroads in their respective market segments due to stiff competition and the inability of Guinness to reinvent itself in the face of market dynamics.

For instance, as part of its expansionist plan, Nigerian Breweries bought smaller breweries in response to a decline in demand for premium brands and in anticipation of playing in the low-end market segment while Guinness stood stiff watching unperturbed.

Now, that the horse has left the stable, the pressure to return the company to profitability has increased in a very challenging climate that has seen a frenetic change of leadership with the appointment to four successive Managing Directors in three years. Industry observers have noted that the frequent change of leadership is symptomatic of the troubles at Guinness.

 

Leave a comment

XHTML: You can use these html tags: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <s> <strike> <strong>

Recent posts

  • Time is ripe for rates cut, says Rewane as inflation slows further in Oct.

    FELIX OLOYEDE This is the appropriate time for the Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) to cut benchmark monetary rates after inflation rate slows down for the ninth consecutive time in October, said Mr Bismarck Rewane, Managing Director, Financial Derivatives. The National Bureau of Statistics on Tuesday released Consumer Price […]

  • ELAN National Lease Conference Focuses on Revamping Nigerian Economy

    FELIX OLOYEDE In furtherance of its objective of promoting the business of leasing in Nigeria, Equipment Leasing Association of Nigeria (ELAN) has concluded plans to organise the 15th Annual National Lease Conference with focus on revamping the Nigerian economy. The conference which is the biggest gathering of stakeholders in the leasing industry is expected to […]

  • Nigeria-centric restaurant, Labule, opens new outlet in Lagos

    Labule, Nigeria-centric restaurant, operated by an indigenous company, Roots Foods Limited, offering real Nigerian local delicacies in a unique environment that combines the setting of a modern quick service restaurant with that of an African setting of a local ‘buka’, has opened a new outlet on Admiralty Road in Lekki Phase 1, Lagos. The brand […]

  • Nigerian banks shine in Ghana

    By JOHNMARK UKOKO Nigerian banks have been credited with “revolutionizing “the banking sector in Ghana, due to the many innovations they brought to Ghana’s banking sector. The Ghana Deputy Minister of Trade and Investment Hon. Carlos Kingsley Ahenkorah said in Lagos that the innovation and transformation of the Ghana’s banking sector is credited to the […]

  • Ajimobi moves to save Oyo APC from disintegration

    By OLUSESAN LAOYE The seeming crisis in Oyo APC has now forced the Governor of the state, Abiola Ajimobi, to begin consultations with stakeholders to convinced members on why they must come together as a body to face the 2019 general elections, Although the internal crisis is yet to break open as the aggrieved party […]

  • YolaDisCo sale stalled as no potential buyers emerge

    By ADEBAYO OBAJEMU Two years after the core investors of the Yola Electricity Distribution Company, YolaDisCo, declared a force majeure owing to their inability to operate under the reign of terror unleased by Boko Haram, the Federal Government is yet to find any investor interested in operating the utility company, it has been learnt. In […]

  • Company Analysis: Much Ado about Seplat

      By TESLIM SHITA-BEY The oil and gas sector has had a bumpy since the beginning of 2017 with local oil major, Seplat, seeing its financials whipped raw by prior year liabilities despite rising revenues over the nine months (9M). The company in the last two years has moved from being distinctively bad to singularly […]

  • How to start a photography business

    By ZUBAIR DANIE While photography could be accounted for as a full blown course in any offering institution of learning for professionalism, the field equally provides a platform for individuals whose passion it is to project images as a form of livelihood. The socio-cultural aspect of Nigerians that play host of events like: wedding, naming, […]

  • BOFE to celebrate unsung heroes in local communities

    OluwasolaJesuseitan, a brand and advertising expert, is an advocate of sustainable brand communications. He is also the founder, Business Owners Forum Enterprise (BOFE), a non-profit making organization, which seeks to build the capacity of business owners in and around Akute, Ogun State. He tells FELIX OLOYEDE in this interview of his organization is promoting business […]

  • Lager wars: Who wins?

    By JOHNMARK UKOKO Nigeria has many lager beer producing companies, some have been in existence for over 50 years while others are quite new in existence in the country. Some of these companies that have over the years churned out millions, if not billions of bottles of beer to Nigerian drinkers are: Nigeria Breweries Plc, […]

  • Nestle sparkles in Q3 results

    By OKEY ONYENWEAKU As the packaged Consumer goods (PCG) sector struggles to stay ahead of falling consumer demand, companies such as Nestle Nigeria plc are bucking the trend of businesses with shrinking bottom lines. Indeed the multi-product packaged goods producer has seen earnings rise to mind boggling with its pre-tax profit rising by a stunning […]

  • 2018 Budget proposals renew old anxieties

          FELIX OLOYEDE   Mixed reactions trailed the presentation of the 2018 federal government budget by President Muhammadu Buhari to the National Assembly (NASS) last week. Public policy analysts have expressed moods from the congenially positive to the outright incredulous. The staggering N8.6 trillion expenditure plan is one of the most audacious in […]

  • Anambra 2017: Obiano battles for life

    By Obinna Ezugwu The time has finally arrived. On Saturday the people of Anambra State will head to the polls to either renew the mandate of the incumbent state governor, Chief Willie Obiano who is running for a second term in office, or elect fresh hands from among other prominent contenders, including Mr. Oseloka Obaze […]

  • (Editorial) CBN’s BVN distraction and matters arising

    Nigeria’s fiscal and monetary authorities have a frustrating way of responding to the seizure of private assets; they typically gloat with glazed eyes over private citizen’s money ready to pounce on the cash like a pack of hyenas starved witless. The recent order by the Central Bank of Nigeria that customer accounts that are not […]

  • 12 Yoga tips for beginners

    The popularity of yoga has soared in the last decades, and it seems that every other friend and acquaintance of ours is already practicing it. But don’t let it fool you into thinking it is easy: yoga is quite challenging, especially for beginners. The good news is that there are some practical tips to make […]

  • Finally, embattled IGP, Ibrahim Idris, appears before Senate

    The Inspector General of Police, Ibrahim Idris, has arrived before the Senate ad hoc committee set up to investigate the allegations and counter-allegations between him and Senator Isa Misau. The IGP was accompanied by his lawyer, Alex Iziyon (SAN) and Special Assistant to the President on National Assembly Matters (Senate), Senator Ita Enang.   Details […]


Visit us on Google+