" /> N4bn loss: Guinness Nigeria faces more challenges | Hallmarknews
Published On: Mon, Feb 6th, 2017

N4bn loss: Guinness Nigeria faces more challenges

Okey Onyenweaku
The once cheerful faces of shareholders of Guinness Nigeria Plc has suddenly turned gloomy as their company’s fortunes continues to fall into a never-ending hole. Unable to ride on the back of an increasingly weaker consumer market for alcohol, the company found its 2016 financial statement dipped in red ink as it posted a towering half year loss of N4.6billion, despite a 19.4 per cent growth in sales. The company’s stock market performance has not fared any better as it lost -73 per cent of its market value in three years sliding from N253 in 2015 to N173 in January 2017.
Half year unaudited results for the company for the six-months ended December 31, 2017 showed turnover rise to N59.49 billion in December 2016 compared to N49.84 billion posted in the corresponding period of 2015.
Cost of sales rose by 55 per cent from N28.44 billion to N43.94 billion, this was the result of a severe rise in the cost of inputs that reflected a massive devaluation of the naira in the last one year. The huge rise in cost of goods as a proportion of sales choked life out of the company’s net sales and sent profit to a deathly dungeon. This was reflected in the staggering pre-tax loss of about N5billion by the middle of 2016 compared to a pre-tax profit of N1.65 billion the previous year. The brewers net loss after tax, rose to a disastrous N4.67 billion compared to a net profit of N1.17 billion in the comparable period of 2015.
Managing director, Guinness Nigeria Plc, Mr. Peter Ndegwa, who tried to assuage the concerns of stakeholders of the company, noted that there were many bright spots for the company going forward but a sorely challenging economic environment and crippling finance charges were leading to severe corporate bloodletting. The company’s net sales growth was being swallowed by escalating operating expenses and higher cost of working capital finance, twin towers that were squeezing gross margins. He noted that to push back against the worrisome headwinds the company had diversified its product portfolio to win greater market share in beverages beyond the larger crowd.
“We now have both International Premium Spirits (IPS) and locally manufactured mainstream spirits within our portfolio and these contributed to revenue growth for the half year. Our accessible beer brands also continue to grow strongly. Our productivity agenda continues to gain momentum enabling us to keep our administrative and distribution costs under control while optimizing our investments to support our brands,” Ndegwa said.
He said the negative bottom-line was caused by the high input costs driven partly by foreign exchange and foreign exchange impact on financing costs. Udegwa stated that the unrealised foreign exchange losses during the half year were responsible for the 166 per cent growth in net finance cost.
However, chairman, board of directors, Guinness Nigeria Plc, Mr. Babatunde Savage, expressed optimism about company’s future notwithstanding the prevailing challenging operating environment.
“We are confident that the steps we are taking to steer the business through these difficult times – including a comprehensive review of our capital structure, the expansion of our brand portfolio and our continued focus on reducing operating costs, will sustain the momentum we have in top-line growth and bottom line recovery,” Savage said.
While the company have 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 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 growing volumes of unpaid workers’ salaries in public and private sectors, in addition the increasing unemployment. Stiffer competition in the sector and companies seem to increase the cost of sales now than ever before. Interestingly, the company has rolled out strategies to recapitalise.

READ  Non Yoruba in S/West inaugurate forum, vow to take rightful place in zone's politics

Shareholders of Guinness Nigeria Plc had last two weeks endorsed the proposed plan by the company to raise N40 billion through a rights issue. They have also authorised the directors to apply any outstanding convertible loan, shareholders loan toward payment for any rights or shares.
However, there are subtle mixed feelings the company may have to engage in more strategic and aggressive marketing to convince shareholders who are already pale for the huge losses they incurred from its disappointing performance recently.
Market observers believe that the company must tinker with the pricing of its shares and incentivise shareholders so they can pick up their rights.
Some advice the company’s rights issue should be priced at an attractive price of about N40.00 a share to woo existing shareholders who have alternative investment options in bonds and treasury bills with better returns.
Analysts have said the brewer has not performed well in recent times, fingering insecurity in the country as part of its challenges.
‘’The results have not been good. Weak demand for its products is affecting its bottom-line. Its big market in the North East which has been affected adversely by the nefarious activities of Boko Haram’’, Said a Lagos based analyst, Managing Director, High Cap Securities Limited, David Adonri.
Similarly, Managing Director of Crane Securities Limited, Mr Mike Ezeh, told Business Hallmark that it is difficult for companies to perform magic in an economy that is experiencing recession.
‘’The company has been posting loses. My fear is how their rights issue will perform. The price has to be appropriately priced before shareholders. Information drives the market, so if there is a good information it affects any company’s shares positively and negatively if it otherwise’’, he said.
Agusto & Co., Research, Credit Ratings, Credit Risk Management had rated Guinness Nigeria Plc a in 2015 as having inadequate working capital, adding that stiff competition for products in the value segments and Sub-optimal distribution network in rural areas are also some its challenges.
In fact, there is a consensus that Guinness Nigeria has failed to re-event itself like its competitor Nigerian Breweries Plc which did strategic acquisitions which has helped it solidify and expand its market base.
Research revealed that the major factors driving the change in beer consumers’ drinking habit include rising cost of living and decrease in purchasing power of consumers which has had an industry-wide impact on the beer market.
Premium beer brands bleeding from the economic squeeze include Guinness Nigeria Plc’s Guinness Extra Stout and Harp Larger Beer, Nigeria Breweries’ Star, and Gulder. While they groan, brands like Goldberg(NB) , 33(NB), Hero(Sabmiller), Trophy (Sabmiller), Life(NB), Champion, Turbo King(Consolidated Breweries) and Wilfort Dark Ale(Sona Breweries), are smiling to the banks.

READ  Nigeria lacks leaders with moral compass - Amb Keshi

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

  • Nigeria lacks leaders with moral compass – Amb Keshi

    By Obinna Ezugwu Former Permanent Secretary, Ministry of Foreign Affairs, Ambassador Joe Keshi has decried what he called the lack of moral compass among Nigeria’s political elite, noting that poor leadership was the country’s biggest challenge. Keshi who bared his mind in a chat with BusinessHallmark in his Lagos home recently, regretted that virtually all […]

  • Non Yoruba in S/West inaugurate forum, vow to take rightful place in zone’s politics

    By Obinna Ezugwu Political and cultural leaders of various ethnic groups resident in the South West, Saturday last week at Ota, Ogun State, came together under the aegis of Non Yoruba Indigenes Empowerment Initiative, to seek ways of working together for a fair deal in the zone’s polity ahead of the 2019 general election. Various […]

  • Don’t celebrate yet, agitation for restructuring not over- Uko warns presidency

    By Obinna Ezugwu Founder, Igbo Youth Movement (IYM) and Secretary General, Eastern Consultative Assembly (ECA), Evang Elliot Uko has warned against any suggestion that the South East geopolitical zone has been “forcefully” and “violently” pacified as according to him, such is false. Evang Uko who is also the Deputy Secretary of Igbo Leaders of Thought […]

  • Nigeria’s Debt Service ratio falls to 45%

    Nigeria has made significant improvement in its debt-service-to-revenue ratio as it dropped from 66 per cent to 45 per cent. This is coming on the back of improved revenue mobilisation from both domestic and foreign sources. The government has been aggressively driving its tax reform with the introduction of Voluntary Assets and Income Declaration Scheme […]

  • Banks’ NPLs reach 10-month high in Q3

    FELIX OLOYEDE Non-Performing Loans (NPLs) in the Nigerian banking industry hit 10-month in September, latest data from the the Nigeria Deposit Insurance Corporation (NDIC) has shown. The report quoted by CNBC states that NPLs in the Nigerian banking sector reached N2.42 trillion at the end of Q3 2017, which is 10-month record high. Muyiwa Oni, […]

  • OPEC Crude Output Drops to Six-Month Low

    Crude production from the Organization of Petroleum Exporting Countries dropped again in November to a six-month low. Total production fell 80,000 barrels a day to 32.47 million a day last month, according to a Bloomberg News survey of analysts, oil companies and ship-tracking data. That was the lowest level since May, when output was 32.29 […]

  • Lagos revives abandoned waste to energy resourcing projects

    By ABATAN ADEWALE JOSEPH Lagos state government is exploring every available opportunity to ensure power supply in the state in view of the dwindling performance of the energy companies in the country. As the business and industrial hub of the economy, Lagos has suffered huge economic losses on account of poor power supply. Governor Akinwumi […]

  • FG appoints Abdul Zubair to replace suspended SEC DG

    The Securities and Exchange Commission (SEC) on Monday announced the appointment of Abdul Zubair as acting Director General. The commission while making the announcement, also reassured the investing public of continued stability of the Nigerian capital market following last week’s suspension of its Director General, Mounir Gwarzo. It would be recalled that Gwarzo was directed […]

  • Kano spends N9bn monthly on salary payment, says Ganduje

    The Kano State Governor, Dr. Abdullahi Ganduje, has said his administration spends N9 billion monthly on payment of workers’ salaries. He added that this effort was commendable in a period where most state governments have not been able to pay salaries as a result of the economic situation in the country. He spoke  in Kano state […]

  • FG’s Npower scheme derailing, faces imminent collapse – Investigation

    By AYOOLA OLAOLUWA The N-Power scheme, introduced by the Federal Government, as a social safety net to reduce the rate of graduate unemployment afflicting the country, is fast derailing from its original objective, and faces imminent collapse, Business Hallmark findings have revealed. While the Federal Government, particularly its major proponent, Vice President Yemi Osinbajo, had […]

  • Gwarzo: The many troubles of a regulator

      By FELIX OLOYEDE These are unpleasant times for Mounir Gwarzo, Chief Executive Office, of the Securities and Exchange Commission (SEC) as he was placed on suspension last week by a previously gun shy Minister of finance, Mrs. Kemi Adeosun. Gwarzo’s position as SEC boss became shaky as a nongovernmental organisation,   Centre for Anti-Corruption and […]

  • 2018 budget: High on hope, low on prospects

      .           Promises of growth and development may be unattainable The 2018 budget will go down in history as the most vilified and repudiated by the legislature that is supposed to give it a stamp of authority. Last week, the two chambers of the National Assembly took a perfunctory appraisal of the budget and consigned […]

  • Anxiety rises over health of banks

    …as recent Fitch downgrade poses new questions BY TESLIM SHITTA-BEY All may not be as well with Nigerian banks as the domestic regulator, Central Bank of Nigeria (CBN), would have many believe. Buried in a heap of poor quality loan assets in the guise of high none performing loans (NPL’s), a growing number of banks […]

  • Maina’s can of worms

    By OBINNA EZUGWU At the hearing conducted by the Hon. Aliyu Madaki-led House of Representatives adhoc committee investigating the reinstatement of former chairman of the Presidential Task Force on Pension Reforms, Abdulrasheed Maina into the federal civil service last week, Nigerians were treated to a show of childish buck-passing. One could draw a parallel between […]

  • Resurgent Equity market signals stronger economic recovery

    By OKEY ONYENWEAKU Investors in the Nigerian equity market have every reason to be happy as the year gradually winds down. Those of who invested early in the year and carefully mixed their portfolio based on the NSE 30 Index would have made a kill should the market close bullish. This is reflected in the […]

  • (Editorial) APGA, a future in jeopardy  

    The All Progressives Grand Alliance (APGA) fought a good fight to retain power in Anambra state last month. Should the result have been different, and it easily could have been, it would have marked the beginning of the end for the party. Power of incumbency, emotional attachment to APGA among the Igbo, rifts within the […]


Visit us on Google+