Guinness Nigeria Plc experienced a progressive profit drop across quarters, ending the full year with a pre-tax loss of N22.1 billion in June 2023. The loss has erased N33.6 billion of the company’s shareholders’ funds — which fell from almost N90 billion to N56.4 billion.
The full-year audited accounts of the brewing company at the end of June 2023, show that it gained further speed on the downside of profit performance in the final quarter — a pattern that ruled quarterly performance all through the financial year.
The company’s after-tax profits declined progressively across quarters from 32 percent in the first quarter (Q1) to 54 percent drop at half-year and from 61.6 percent fall in the third quarter (Q3) to 216 percent plunge into a net loss of N18.2 billion at full year.
The final quarter produced a big loss of over N24 billion, which consumed the after-tax profit of N5.9 billion at the end of Q3 and left the huge loss for shareholders at the end of the year.
The major pressure that built the loss in the final quarter came from massive growth in finance cost, which, as we observed at the end of Q3, ‘is the critical factor in the falling profit of the company in the current financial year’.
Finance cost multiplied 25 five times to N53.3 billion at the end of the year, speeding up from N9.3 billion at the end of Q3.
The figure constitutes mostly foreign exchange (FX) losses that amounted to over N48 billion for the year — advancing from less than N1.3 billion in the prior financial year.
There was an outstanding growth in finance income from N1.9 billion in 2022 to N7.8 billion in 2023, which helped to lower net finance cost to N45.5 billion at the full year.
The net finance cost figure yet represents a massive swell from less than N226 million in the preceding financial year. It scurried up from N7.5 billion at the end of Q3 to consume nearly twice the entire operating profit of N23.4 billion for the year.
The FX loss added to the operating constraints the company faced in the business terrain in the year, as costs accelerated while sales revenue slowed down.
Sales revenue slowed down in the year at an increase of less than 11 percent in 2023, down from a 28.9 percent increase to N206.8 billion in 2022. Production cost grew ahead of sales revenue at 12.8 percent to close at N151.3 billion for the year.
The result is a decline in gross margin, as gross profit improved by 7.5 percent to N78.1 billion. Further pressure came from administrative expenses that rose by 23.8 percent to almost N17 billion at the end of the year.
The two major cost increases consumed more than the increase of N5.5 billion in gross profit, leading to a decline in operating profit from N23.9 billion to N23.4 billion over the period.
Net finance cost engulfed the operating profit and the resulting loss drained the company’s capital account. Retained profit fell by 81 percent in the year to close at N7.9 billion at full year — the lowest the company has seen in many years.
The drop in shareholders’ funds reflects two major losses in recent years — the loss of N12.7 billion in 2020 and N18.2 billion in the 2023 financial year.
Guinness had to resort to new borrowings to fill up the gap in equity resources and finance its assets. The company’s borrowings more than doubled from N31.3 billion in 2022 to N63.7 billion at the end of the 2023 financial year.
A further loss in Q1 of the current 2023/24 financial year could throw retained earnings into deficit and speed up even further the erosive power on equity cushion.