Guinness Nigeria Plc has reported a 66 per cent decline in profit after tax for the Q2 2016 ended-December 2015. The brewer in a filing with the Nigerian Stock Exchange (NSE) said its net earnings dropped to N1.172 billion during the second quarter of the year as against N3.398 billion posted a year earlier, accounting for 66 per cent decrease.
The company also reported 65 per cent drop in half year pretax profit to N1.652 billion compared with N4.658 billion posted the same period last year. Revenue was equally down to N49.836 billion during the period under review from N55.267 billion a year earlier, representing a 10 per cent decrease.
Guinness Nigeria had reported a 76 per cent growth in profit after tax for the Q1 2016 ended September 2015. Its net earnings dropped to N362.296 million during the first quarter of the year as against N1.484 billion posted a year earlier, accounting for 76 per cent decrease.
The company also reported 74 per cent drop in first quarter pre-tax profit to N 517.656 million compared with N1.962 billion posted the same period last year. However, revenue climbed to N21.741 billion during the period under review from N21.047 billion a year earlier, representing a three per cent increase.
The country’s second biggest brewer’s full-year net income fell 19 per cent to N7.8 billion from N9.5 billion as weaker economic growth hurts consumption of beer brands in the country. Profit before tax dropped by eight per cent from N11.7 billion in 2014 to N10.7 billion during the period under review.
However, revenue rose nine per cent to N118.5 billion from N109.2 billion, while costs climbed eight per cent and tax payments soared 42 per cent, the company said in a statement published on the Nigerian Stock Exchange’s website.
The brewer proposed a dividend of N3.20 per share, payable on November 27. Reacting to the results, analysts at FBN Capital had said that the weak sales growth delivered by Guinness was reflective of the prevailing macro headwinds, the tough operating environment and the squeeze on household wallet.
Given that “Orijin,” Guinness’ innovative herbal drink, has been largely responsible for the volume/ topline growth seen over the last few quarters, the brand may have reached a stable growth phase. We also suspect that “Ace roots,” a rival product from Nigerian Breweries, may be chipping away at Orijin’s market share.
“Pending comments from management, we believe that the severe gross margin contraction was most likely driven by a marked rise in raw material costs on the back of fx pressures. Although we had expected the 22 per cent depreciation of the naira (between Q4 2014 and Q1 2015) to be fully reflected in COGS in Q1 2016 (end-Sep), we did not expect the impact to be this severe and had modelled a gross margin contraction of 331bps y/y,” they noted.
