In a recent financial disclosure, Guinness Nigeria Plc reported a loss of N5.233 billion for the year ending December 2023. The brewing company’s unaudited interim financial statements, filed with the Nigerian Exchange Limited on Thursday, highlighted the impact of foreign exchange expenses on its operating profit.
Shareholders expressed their dissatisfaction at the 73rd Annual General Meeting, particularly noting the non-declaration of an interim dividend for the period ending June 2023. Addressing these concerns, the former Managing Director, John Musunga, attributed the loss to the forex harmonization policy of the Federal Government.
Musunga explained that the forex policy had adverse effects on the company’s retained earnings, a critical factor in dividend declaration. He stated, “Our retained earnings declined quite a bit because we had to service that change in FX, and our profit and loss position also became adverse as we recorded N18bn in losses. Good practice says that if you don’t have retained earnings or declare a loss, you don’t pay dividends.”
Despite challenges, Guinness Nigeria reported a 20.38% increase in revenue, reaching N142.595 billion by the end of 2023. However, the surge in the cost of sales, driven by marketing and distribution expenses (N23.790 billion), administrative expenses (N8.264 billion), and a significant 255.79% rise in finance expenses to N23.884 billion, contributed to the N5.233 billion loss.
A detailed breakdown of the finance expenses revealed that forex-related issues continued to impact the company. The loss on remeasurement of foreign currency balances was a major contributor to the overall increase, along with exchange differences on foreign currency loans and accrued interest.
In a strategic move last October, Guinness announced its plan to cease the importation and distribution of certain Diageo international premium spirits effective from April 2024. The decision aimed to reduce the company’s foreign exchange requirements. Additionally, Diageo, the multinational alcoholic beverage company, is set to establish a Nigerian arm in response to the discontinuation of importing its spirits by Guinness.
The financial challenges faced by Guinness Nigeria underscore the complexities businesses encounter in navigating foreign exchange dynamics, and industry experts will be closely watching for the company’s future strategies to address these issues.