Weak sales impact performance in brewery sector
In what looks like a complete recovery from the setback of the economic recession, Guinness Nigeria has announced that its profit after tax rose by 249 per cent to N6.7bn for the year ended June 30, 2018, compared to the N1.9bn reported in the previous year. The brewery giant also declared a 14 per cent growth in its revenue from N125.92bn in 2017 to N142.98bn in 2018.
This is a welcome development for a company which in 2016 posted a loss of N2bn ($6.4m) for the 12 months through June compared with a profit of N7.8bn a year earlier. Guinness Nigeria’s performance also reflect the country’s gradual recovery from the 2016 recession. However, analysts have warned that this is not a sign that the brewery industry was out of the wood just yet, as consumers’ purchasing power is still relatively weak from the recession.
And while the industry awaits the full year’s report of other major players in the industry, indications abound that they are not likely to show positive growth in profit. The signs were obvious in Nigerian Breweries Q1 and H1, 2018 reports. In its first quarter of 2018 financial report, Nigerian Breweries Plc Profit after Tax came to N10.2 billion. This represented an 11.8 per cent decrease over the N11.4 billion recorded in the corresponding period in 2017.
The Company’s revenue equally dipped by nine per cent from N91.3 billion in 2017 to N83.0 billion in the current period. NB’s Board of Directors explained the dip in performance by stating that while there are some signs of improvement in the macroeconomic conditions, they were yet to reflect in consumer spending.
The negative trend continued in NB Plc’s performance in its mid-year report where the company declared that its Profit After Tax (PAT) declined by 22 percent for the half year ended June 30, 2018.
The company during the period posted a profit after tax of N18 billion compared to N24 billion recorded in the corresponding period of 2017. Profit before tax dropped by 19 per cent from N34 billion in 2017 to N28 billion in the period under review. NB’s revenue equally weakened by five per cent to N173 billion from N181 billion in the comparative period of 2017.
Based on these outcomes, analysts have predicted that the NB’s growth trajectory is not likely to be significantly altered come next year January or February when its full year report is made public.
International Breweries, the Nigerian subsidiary of AB InBev, the world’s largest brewery has not done any better. The company reported a first half 2018 loss of N2.8 billion. The decline in profit came despite a strong revenue boost of N53 billion in the first half.
In the same vein, Champion Brewery, another major player in the industry, has also shown weak performance in its nine months report for 2018.
Champion Breweries, which is based in Uyo, recently reported a 21% drop in profits for the first nine months of 2018 to ₦120 million. In the same period in 2017, the company earned ₦152 million. The profit decline accelerated in the third quarter by 40 percent to ₦40 million, from ₦66 million in the previous year.
The drop in earnings was attributed to disappointing sales despite higher selling and distribution expense.
Analysts have said that AbInBev, the multinational brewer is at the moment more focused on deepening its footprint and driving brand awareness in Nigeria and less focused on declaring profit.
AbInBev have been aggressively rolling out marketing initiatives and introducing new products to the market in a bid to win market share in the competitive brewery market in Nigeria. The company’s pricing strategy has also been a game changer in the industry.
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