How two Nigerian brewing giants recorded N119.6bn losses in H1 2023

By Ralph Tathagata
Following the protracted and multidimensional currency depreciation in Nigeria, occasioned by the foreign exchange (forex) crisis, Guinness Nigeria Plc and the Nigerian Breweries Plc, two of the country’s brewing giants have suffered humongous losses amounting to billions of naira.
The spiraling currency depreciation, the liquidity crisis in the forex market­ – which manifests in the acute shortage of forex in the official window, and the volatility of the exchange rate that creates considerable uncertainty and unpredictability for investors have in no small measure contributed to the erosion of their profit margins – because not all the additional cost could be passed on to consumers.
While Guinness Nigeria Plc recorded a N49 billion in exchange rate losses according to the information contained in its full-year results for the period ending June 2023,  Nigeria Breweries Plc reported an exchange rate loss of N70.6 billion for the second quarter of the year that ended June 30th, 2023.
For Guinness Nigeria, the loss per share declared was N8.29 kobo versus N7.15 earnings per share a year earlier. For Nigerian Breweries, the loss per share was N4.6 and the losses were a result of the unification of the exchange rate which has led to forex losses upon the revaluation of its dollar-denominated loans.
Also for Guinness Nigeria, the revenue for the year was N229.2 billion +10.9% YoY; gross profit was N78.1 billion +7.5% YoY; operating profit was N23.3 billion -2.3%; net finance cost N45.4 billion +20040.1%; loss after tax was N18.1 billion -216.1%; loans and advances were N63.7 billion vs N31.3 billion YoY; cash generated from operations was N57.3 billion vs N38.9 billion YoY, while cash in bank was N92.1 billion vs N69.1 billion; the dividend declared is N15.6 billion compared to N1 billion YoY, and the DPS is N7.14 per share +1452%YoY.
The forex depreciation led Guinness Nigeria to a loss of N18.1 billion, its first full-year loss since 2020 when Covid-19 ravaged company financials.
The key highlights of Nigerian Breweries’ 2023 Q2 results include: net revenue of N154 billion +13% YoY; gross profit of N68.4 billion +21.5% YoY; operating profit of N26.6 billion +119.7% YoY; net finance cost of N77 billion +970.8%; pre-tax loss of N50.2 billion; gross margins of 44.4% versus 41.3% YoY; operating profit margins of 17.3% versus 8.9% YoY and a working capital of N318.6 billion. It’s important to add that the losses did not impact cash as the company still has a healthy cash balance of N34.9 billion. However, its negative working capital suggests it has to find money to repay its loans when they fall due within a year.
The current losses are likely to impact full-year profits considering that NB also reported a profit after tax of N13.1 billion last year (2022). So far, NB has reported back-to-back losses in the first two quarters of 2023 after reporting a loss before tax of N17.4 billion.
While each of these dimensions of losses has a diverse impact on the economy, the protracted currency depreciation and forex crisis have far-reaching implications for major economic players such as Guinness Nigeria and the Nigerian Breweries which includes high cost of production because of the high import dependence of Nigeria’s manufacturing sector for imported raw materials, high operating costs across businesses in practically all sectors of the economy, and low sales and turnover because of the increase in price and effect on demand.


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