The Nigerian Breweries’ group closing after tax profit of N18.7 billion at half year, shrank to N13 billion at full year 2022, as the company operated the entire second half at a loss. A loss of about N4 billion occurred in the third quarter (Q3), which cut the profit figure to N14.7 billion, and a further loss in the final quarter, again, lowered the bottom line for the year.
The brewing company lost the impressive profit growth record of 79.5 percent year-on-year at the end of Q3 and managed to step up 4 percent on its closing group after-tax profit of N12.7 billion in 2021.
This was the question mark we placed on the company’s earnings outlook at the end of Q3 — whether the growth rate would be maintained to full year or lost in the final quarter.
The company’s audited financial report for the full year ended December 2022 shows that even the moderate profit improvement was squeezed out of a huge tax saving. A much bigger loss could have occurred in the final quarter had it not been for a drop of 62.3 percent in income tax expenses to N4.2 billion.
Pre-tax profit dropped by 26.8 percent to N17.3 billion in the year, reflecting increased operating pressure in the final quarter. The cost saving from tax expenses made the big difference between the drop in pre-tax profit and the moderate improvement in after-tax profit in the year.
Two major expense lines generated the operating pressure that consumed revenues and created losses for the company over the last two quarters of the year. Net foreign exchange loss maintained the lead in cost increases as seen in the interims — multiplying close to four times to N26.3 billion at the end of the year.
The huge net foreign exchange loss of the company reflects the major foreign exchange difficulties faced by manufacturers generally in 2022. The drop in pre-tax profit is a direct effect of the swollen foreign exchange losses in the year.
The second source of operating pressure is marketing and distribution expenses, which rose by 38 percent to N135.8 billion and claimed 63.8 percent of gross profit against 61.3 percent in the preceding year.
The company’s management was able to keep input cost moderated, as it grew below sales revenue at 21.8 percent to N337.3 billion compared to 25.9 percent growth in sales revenue for the year. Nigerian Breweries generated a turnover of N550.6 billion in 2022, improving from N437.3 billion in 2021.
The stronger growth in sales than input cost powered a top record increase of 33 percent in gross profit, amounting to N213.3 billion at full year.
Part of the gain was claimed by the strong growth in selling and distribution expenses, a drop of 35.4 percent in other income to less than N3 billion ;as well as a net loss of N575 million in financial assets for the year.
The incursion lowered the increase in operating profit to 24.7 percent to close at N51.7 billion.
The company was able to reduce its cost of finance from N11 billion in 2021 to N8.4 billion in 2022. This is despite that its borrowings multiplied from N31.4 billion at the end of 2021 to N122.2 billion at the end of 2022.
The jump in net foreign exchange loss pushed net finance cost from N17.8 billion to near doubling at N34.4 billion over the same period.
Nigerian Breweries was on the second year of recovery in 2022 after three years of running profit drop bottomed at N7.4 billion in 2020. It rebounded with a profit leap of 72 percent to N12.7 billion in 2021, which slowed to the moderate improvement in 2022.
The company is paying a final cash dividend of N1.03 per share, having paid an interim cash dividend of 40 kobo per share at the end of Q3.
