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Nigerian Breweries Records N57 Billion Loss Due to Naira Devaluation Impact

October 25, 2023

Net loss at the country’s foremost beer-maker Nigerian Breweries came to N57.2 billion for the first three quarters of the year.

The loss represents the biggest since 1946 when UAC struck a deal with Heineken, the current majority owner, to incorporate the brewer in Lagos.

The company, half of whose input costs are imported because the bulk of its raw materials come from overseas suppliers, is confronting various bugbears in perhaps its most tumultuous year on record, making operations especially difficult.

A demonetisation move by the central bank at the start of the year battered demand from consumers already strained by weak purchasing power.

Worse still, inflation at over eighteen-year high of 26.7 per cent in the last month of the review period meant costs had to be passed on to consumers and a dramatic fall in the exchange rate of naira to the dollar quickened the costs of foreign exchange transactions including servicing overseas debts.

Nigerian Breweries relies on cash for nearly 80 per cent of its retail sales, making the cash crunch a pain in the butt.

Net loss on FX transactions jumped more than eight times to N86.8 billion, according to the company’s unaudited financial statements released on Wednesday.

“Overall, volumes declined in the period under review due to continued high pressure on disposable income and the socio-political challenges in various parts of the country,” the consumer goods giant said in a separate statement.

“The operating profit was impacted by the lower volumes, higher input costs influenced by inflation and devaluation of the naira, and a one-off restructuring cost. A combination of foreign exchange losses due to the devaluation of the naira and higher interest costs resulted in a net loss during the period.”

Growth in the top line was flattish as revenue inched up 2.1 per cent to N401.8 billion.

Nigerian Breweries witnessed a surge in excess of threefold in finance costs, which climbed to N18.9 billion on an increase in interest expense.

Pre-tax loss stood at N78.2 billion compared to a profit after tax of N19.1 billion a year ago.

Loss after tax was N57 billion. The brewer had reported an after-tax profit of N14.8 billion in the same period of last year.

Shares in the company depreciated by 2.6 per cent at market close on Wednesday at N38 per unit.

 

Credit: Premium Times

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