" /> 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.

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.

Reactions from Facebook

comments and opinions

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

  • The Rape of Skye Bank:

    FELIX OLOYEDE| Skye Bank has never been lucky, right from its inception in 2005, the financial institution has been serially plundered by its key management figures. Until recently, however, the bank had plodded along impressively keeping its nose as clean as whistle. But with a new and younger board that took over from the sagely […]

  • Call for restructuring unstoppable – OneVOICE

      By EMEKA EJERE  | Despite the rejection of devolution of power to the federating states by the National Assembly, members of Nigerian civil society under the aegis of ‘OneVOICE’ have insisted that the campaign for step by step restructuring of Nigeria must continue. It believes that certain items on Exclusive Legislative List of the […]

  • Broad Street Watch: What really is Nigeria doing right?

      Teslim Shittay-Bey  | It is almost cliché that Nigeria is the sick man of Africa. All things dark and ugly have gradually found a nestling home in Africa’s largest black nation.  Ranging from bloody insurgency, human trafficking, nepotism, ethnic irredentism to grand larceny and political misconduct, Nigeria has been punched into a squared corner […]

  • Quest for Food Sufficiency: ‘Nigeria operates below 50 tractors per 1,000 km2, a far cry from the African standard.

    FELIX OLOYEDE  | Nigeria’s drive to attain food sufficiency may take a longer time if frantic efforts are not made to reverse the current trends of very low mechanized agriculture in the country. The country is way off below global standard in terms of the number of tractors per land area that farmers own, having […]

  • Business Feasibility: Table water production

    DANIEL ZUBAIR  | Nigeria’s bottled water industry has grown phenomenally over the past decade, with volume sales growing at an annual rate of 31% between 2002 and now. The market accommodates both multinationals, large local corporate and thousands of SMEs across the country. Bottled water is expected to comfortably surpass carbonates as the most widely […]

  • Nigeria is having problem because the centre is too strong – Coach Onigbinde

      Chief Adegboye Onigbinde  is a former coach of the Nigerian national football team, the Golden Eagles. Onigbinde has been involved in sports administration in the country at different levels over the past four decades. He is still a member of FIFA’s Technical Committee. Recently he was found in a gathering of politicians from various […]

  • Anambra 2017: Obiano, Nwoye, Uba, Chidoka lead the pack as 32 aspirants justle for guber tickets 

      A total of 32 governorship aspirants, 12 of whom are in the country’s ruling party, the All Progressive Congress (APC), seven from the Peoples Democratic Party (PDP), four each from the All Progressives Grand Alliance (APGA) and United Progressive Party (UPP), are presently justling for tickets of the various political parties ahead of the […]

  • Those resisting restructuring are asking for dismemberment of Nigeria — Nosa Igiebor  

      Restructuring and fiscal federalism are touchy issues for different Nigerians for a wide variety of reasons ranging from the blatantly ethnic to the brazenly self-serving and economic. However some Nigerians see within the call for restructuring and fiscal decentralization a mechanism for growing the Nigerian economy in a manner that would ensure sustained growth […]

  • Enjoy Your Summer with FirstBank Dollar Denominated Cards

      This summer promises to be an exciting one for holiday makers with FirstBank’s bouquet of Dollar denominated cards.  Convenience, security, flexibility and improved spend are the key defining features of these Dollar cards. To delight customers, wherever they travel this summer, FirstBank offers three Dollar card products namely – Visa Gold, Visa Dollar Prepaid, […]

  • My love is for Journalism, but branding is my passion, says Wale Adebiyi, MD, Parvenu Media Services

    Parvenu Media Services is an Ibadan-based SME that is making waves in the personal and corporate branding business in Nigeria. The man behind this fast-growing venture, Wale Adebiyi, a journalist turned branding specialist has been running the business for about a decade. In this interview with FELIX OLOYEDE, he narrates how Parvenu Media Services has […]

  • Do you think that Festac Town can reclaim its glory days?

    Festac Town has lost its glory and many part of the once clean and enviable community is no longer fit for human habitation.  Do you think that Festac Town can reclaim its glory days? Reactions from Facebook comments and opinions

  • First Bank Dopemu bubbles with customers

    ENIOLA ILORI| At a time of crippling recession some industries have proven to be fairly resilient. The banking sector despite the loud and undisguised anger of economic agents in other sectors of the economy has shown its ability to defy earnings gravity by pulling up corporate profits against the odds. Indeed despite the harsh financial […]

  • CAKE BAKING

    DANIEL ZUBAIR| The cake making business is a very lucrative and profitable venture. A lot of people like and appreciate cake. This makes it an easy product to sell. Cake is one of the most consumed snacks and meal by people in Nigeria and all over the world. Reasons Why You should Start Cake Making […]

  • Visa expands global transaction processing with facilities in Singapore, UK

    EMEKA EJERE|   Global payments technology company, Visa has announced expanded transaction processing capabilities in two state-of-the-art data centres in Singapore and the United Kingdom. According to the company, the new global processing hubs will increase the speed, resilience and geo-diversity of infrastructure, while strengthening the company’s ability to deliver new and more sophisticated ways […]

  • Wapic Insurance intensifies growth drive

    EMEKA EJERE| Innovative moves by Wapic Insurance Plc to pat down the adverse effects of recession on its top line earnings has seen the insurer raise its half year (H1) 2017 premium by 31.47 per cent year-on-year. The aggressive drive for new businesses and written premiums helped drive its profit higher, with the company posting […]

  • Stakeholders seek immediate upgrade of maritime infrastructure

    By FUNSHO OLOJO Stakeholders in the maritime sector have recommended urgent upgrade of the industry’s infrastructure to make it more productive. They spoke separately during the 2017 African Day of Seas and Oceans in Lagos. The Managing Director, Nigerian Waterways Authority, Mr. Boss Mustapha, in his presentation drew attention to the condition of Nigerian roads, […]


Visit us on Google+