Nigerian Breweries (NB) Plc, the local unit of Heineken NV has reported a 10.02 percent drop in its second quarter profit as the company continues to grapple with the economic doldrums that is causing unease for consumer goods firms in Africa largest economy.
Profit was N21.47 billion in the first six months through June 2015, from N23.87 billion the previous year. Sales increased 7.19 percent to N151.67 billion as the company enjoyed patronage of its wide portfolio product.
Net margin, an economic measure of profitability and efficiency reduced to 14.15 percent, from 16.87 percent last year. This reflects the rising cost margins caused by harsh economic environment.
Nigeria breweries and other consumer names have been lurching as weak consumer spending, rising inflation and insurgency in the north part of the country that makes it difficult for firms to shift goods to the crisis region crimp sales.
Nigerian consumer inflation rose to 9.2 percent year-on-year in June, in line with expectations but above the central bank’s target upper limit, from 9.0 percent in May, marking the highest rate since February 2013, according to data from the national statistics office.
The disruption in the fuel distribution fueled by rift between the Petroleum oil marketers and government over unpaid subsidy monies culminated in hike in transport fares that squeezed consumer wallets hence causing a sharp decline in beer volume.
NB’s rising costs also reflects the pains of manufacturers as a lot have to rely on diesel oil, an expensive energy source to run generators for factories as electricity from the grid is inconsistent and unreliable.
This invariably spirals production costs and shrinks profit margins.
The International Monetary Fund (IMF) has cut its growth forecast for Nigeria in 2015 to 4.8 per cent, up from 7.3 per cent it forecast in October on the back of drop in oil price.
Analysts are calling on the new government to create an enabling environment for consumer goods as the country’s young and growing population with voracious taste for consumption portends immense opportunities for these firms to tap into.
NB’s merger with Consolidate Breweries (CB) Plc is yielding the desired synergy as the group wider product portfolio resulted in the revenue increase.
The company enjoyed enormous patronage from the “33” larger beer, formerly produced by CB.
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