By Milcah Tanimu
Nigerian Breweries Plc, the leading brewer in Nigeria, faced a substantial financial setback in 2023, registering an after-tax loss of N106.31 billion. This stark reversal stemmed primarily from foreign exchange losses, as revealed in its latest financial report.
The company transitioned from a profit of N105.8 billion in 2022 to this significant loss, a shift highlighted by CardinalStone Research in its earnings analysis. FX losses notably strained Nigerian Breweries’ full-year earnings, particularly evident in a staggering 482.1 percent year-on-year increase in net loss attributed to foreign exchange transactions. This surge was largely driven by deposits from imports, which rose from N6.9 billion in 2022 to N16.2 billion in 2023, and foreign-denominated bank loans.
Nigerian Breweries’ net loss from FX transactions skyrocketed to N153.33 billion from N26.34 billion during the period under review. Despite an uptick in revenue to N599.64 billion from N550.64 billion, costs surged, with cost of sales rising to N387.03 billion from N337.31 billion. The company’s sales witnessed a modest 8.9 percent growth, attributed to product price increases, while costs escalated by 14.7 percent year-on-year, primarily driven by higher raw material and transportation costs.
The challenging economic landscape in Nigeria throughout 2023 significantly impacted businesses nationwide, including Nigerian Breweries. Factors such as the redesign of naira notes leading to cash shortages, high inflation rates (with food inflation exceeding 30 percent), petrol subsidy removal, naira devaluation, and FX scarcity intensified the already difficult operating environment.
Selling and distribution expenses climbed to N142.49 billion from N135.83 billion, while administrative expenses rose to N28.64 billion from N28.15 billion. Finance income increased to N513.24 million from N349.19 million, but finance costs surged to N36.37 billion from N8.42 billion.
Hans Essaadi, the managing director/CEO of Nigerian Breweries, acknowledged the challenging economic conditions, highlighting persistent cash scarcity, rising energy costs due to fuel subsidy removal, naira devaluation, FX scarcity, and constrained consumer spending amidst high inflation. Despite these adversities, Essaadi noted a 9 percent revenue growth driven by positive price mix. However, the devaluation of the naira inflicted a substantial loss on foreign exchange transactions.
Management’s strategy to mitigate risks amid the tough macroeconomic environment entails focusing on a positive price mix, efficient sales operations, robust cost management, and other efficiency measures, as outlined by analysts at CardinalStone Research.
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