Guinness Nigeria, one of the leading beverage companies in the country, has reported a 5 percent drop in its profit after tax for the first quarter of 2023. The decline in profits was attributed to rising input costs and foreign exchange losses experienced during the period.
According to the financial report released by the company, Guinness Nigeria’s profit after tax fell to N2.6 billion in Q1 2023, down from N2.75 billion during the same period in 2022.
One of the significant factors contributing to this decline was the substantial increase in input costs, which rose by 19.6 percent, reaching N41.4 billion in Q1 2023 compared to N34.61 billion in the corresponding period of 2022. These input costs represented a staggering 69.5 percent of the total revenue, a 400 basis point increase from 65.5 percent in Q1 2022 when they amounted to N52.85 billion.
Guinness Nigeria also reported an unrealized foreign exchange loss in its finance expenses, which surged to N1.93 billion in Q1 2023, compared to N1.56 billion in the same period in 2022. Similarly, foreign exchange losses recorded in the company’s finance income increased to N49.43 million in Q1 2023, up from a loss of N351,000 in Q1 2022.
Despite these challenges, the company managed to achieve a marginal increase in revenue, with a growth of 12.7 percent, bringing the total revenue for Q1 2023 to N59.54 billion, compared to N52.85 billion in Q1 2022. The growth in revenue was primarily driven by an increase in sales within Nigeria, which reached N58.7 billion, up from N51.92 billion in the same period in 2022. However, revenue from export sales dropped to N843.74 million in Q1 2023, down from N942.18 million in Q1 2022.
Analysts at CSL Research attribute the mixed results to the nation’s high inflation and reduced consumer purchasing power, which has affected sales volumes. They believe that the upcoming holiday season may drive sales, leading to an improved performance in the next quarter.
In a strategic shift in its distribution model, Guinness Nigeria announced that, effective April 2024, it will no longer import or distribute certain Diageo international premium spirits, including popular brands such as Johnnie Walker, Singleton, and Baileys. This change aligns with the company’s long-term growth strategy and Diageo Plc’s decision to establish a wholly-owned spirits-focused business to manage its premium spirits portfolio across West and Central Africa, with Nigeria as a key hub.
Guinness Nigeria’s other income also saw growth, reaching N1.4 billion in Q1 2023, up from N660.38 million in the same period in 2022.
In terms of expenses, marketing and distribution expenses decreased to N8.31 billion from N9.41 billion, and administrative expenses were reduced to N3.35 billion from N3.58 billion. However, finance income declined to N563.93 million from N597.5 million, and finance expenses increased to N4.62 billion from N2.46 billion. Personnel expenses, which include provisions for gratuity liabilities and other long-term employee benefits, surged to N4.65 billion in Q1 2023 from N3.82 billion in the same period in 2022.
The company’s inventories stood at N34.93 billion, consisting of N12.41 billion in engineering spares, N10.1 billion in finished products, and N7.77 billion in raw materials and packaging materials. Additionally, inventories in transit amounted to N2.81 billion, while products in process were at N1.84 billion during the period.
Despite the challenging economic conditions, Guinness Nigeria reported that its basic and diluted earnings per share increased to N119 per share, up from N125 per share in the first quarter of 2022. The company remains optimistic about its long-term growth prospects and future financial performance, even in the face of prevailing economic challenges.
