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Nigerian Breweries Plc vs Guinness Plc, Guess Who did better?



If there is ever anything in Nigeria as close as the Coca Cola Pepsi Co rivalry in Nigeria then it has got to be the Nigerian Breweries Plc and Guinness Plc. Between both companies lie at least 5 of Nigerians biggest brands, namely, Star, Guinness Stout, Harp, Malta Guiness  and Maltina. These are household names all over Nigeria and generate huge sums of money for both companies. The Beer Power Houses of Nigeria have been so dominant for years even the threat of the Global Meltdown and the banking crisis seem not to have fazed them. Rather, they have seen earnings continue to rise year after year.

Since the battle is between the two giants at least within their industry its time we match both companies together and see who is better at running the business efficiently and maximizing returns on equity.

From above it may seem Nigerian Breweries performed better in their respective annual accounts. It had a higher turnover, operating profit and profit after tax. NBL also showed better efficiency as Admin, Selling & Distribution Expenses was 49% of Gross Profit and against 53% for Guinness. Return on Equity was also great for NBL Shareholders amassing a whopping 49% as against 45% for Guinness. It is important to note that both company’s have different financial year end (see above). This makes comparisons a little difficult.

However, by Nigerian Standards both company’s did amazingly well in the respective years.  Return on Equity of above 40% is remarkable good for any company. Even with intense competition they (NBL and Guinness) are still able to make good Operating Profit Margins of 25% and 21% respectively. I dare say Warren Buffet himself will have both in his portfolio if he were in Nigeria.  NBL and Guinness are companies any long term value Investor will have in its portfolio.Between this two company’s Nigerians has spent a whopping sum of N354b on beverage (including alcohol) in 18 months making their business model almost insulated. Interestingly the beer market still has immense growth potentials. However, this is threatened by inflation and rising cost in the standard of living of most Nigerians. Pundits believe this will dent their earning potentials in the the coming year. I personally do not see this as much of threat to the company as Nigerians regardless of the economic situation will still consume. For example, NBL in its First Quarter 2012 results reported an Operating Profit margin of 23.15% almost at par with the prior year which was 23.07%. Revenue also grew 29% from N52b in  3 months to march 2010 to N67.2b same period 2012. This is despite the month of January where the country witnessed an economic melt down. The only problem both companies may face is the huge cost of debt which they successfully mitigated against in the prior year by hedging properly. A huge debt load (especially Naira) will affect earning especially now that interest rates are off the roofs.

Another threat may well be the imminent entrant of SAB Miller the second largest brewer in the world.  Whilst its a threat for Investors, the Company and Shareholder, its probably a welcome threat for consumers who will only hope beer prices, a perfectly inelastic product for some, crash due to intense competition. Beer wars like other forms of warfare, both the Victor and Vanquished experienced a bitter sweet end. Similarly, for consumers, the quality of a beer depends on how “bitter/sweet” it is.

Ugo Obi-chukwu "Ugodre" is a chartered accountant with over 16 years experience in financial management, corporate finance and financial analysis. He is also a retail investor and a personal finance advocate with over a decade experience investing in the Nigerian stock market.Ugo is the founder/Publisher of Nairametrics and blogs regularly on the website.



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    Business News

    DPR says it has accurate data of country’s crude production volume

    Head, Public Affairs of DPR, Mr Paul Osu, said every litre of crude produced in the country was adequately captured during the process of extraction.



    Nigerian oil cargo

    The Department of Petroleum Resources (DPR) has said that the agency has an accurate record of the crude oil produced in the country.

    This is in reaction to claims that the exact volume of crude oil produced in the country has remained unknown.

    While making this disclosure in a statement in Lagos, the Head, Public Affairs of DPR, Mr Paul Osu, said every litre of crude produced in the country was adequately captured during the process of extraction.

    What the Head, Public Affairs of DPR is saying

    Osu said DPR has the responsibility of monitoring and accounting for crude oil production which is the basis for determining the government’s revenue through royalty payments by operators for sustainable development.

    He said: “As a further step to boosting crude accounting process from production to export, DPR recently launched the National Production Monitoring System (NPMS).

    NPMS is an online platform for direct and independent acquisition of production data from oil and gas facilities in Nigeria.

    NPMS as an electronic data transmission tool at production and export terminals is designed to better predict the performance of oil and gas reservoirs and better production forecasting.”

    Osu noted that the NPMS tool enables DPR to exercise surveillance, perform production monitoring and data analysis for utilisation and forecasting.

    He said DPR as a business enabler and opportunity house would continue to develop robust and strategic initiatives to ensure timely and accurate payment of rents, royalties and other revenues due to the government.

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    In case you missed it

    • It can be recalled that the Executive Secretary of the Nigeria Extractive Industries Transparency Initiative (NEITI), Orji Ogbonnaya-Orji, on Thursday said the exact volume of crude oil produced in Nigeria, especially at the deep offshore fields, is not known by anyone.
    • He said the exact volume of crude oil produced in Nigeria had remained unknown because of the absence of meters at wellheads and the lack of capacity to monitor deep offshore fields.

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    Sanwo-Olu flags off Red line rail project as Lagos compensates property owners

    The 37-km Rail Mass Transit Red Line will traverse from Agbado to Marina, moving over 1 million commuters daily.



    FG inks $3.9 billion deal with Chinese firm for construction projects

    The Lagos State Governor, Babajide Sanwo-Olu, has flagged off the construction of the 37-km Rail Mass Transit Red Line, which will traverse from Agbado to Marina, moving over 1 million commuters daily.

    This is as the state started the compensation of identified project-affected persons of the Lagos Rail Mass Transit Red Line project with the Governor handing over cheques to displaced property owners who were affected by the right-of-way.

    The groundbreaking ceremony which took place at the Ikeja Train Station on Thursday was witnessed by the Minister of Transportation, Rotimi Amaechi, who was represented by the Director-General of the Nigerian Maritime and Safety Agency (NIMASA), Dr Bashir Jamoh, and the Deputy Governor of Lagos State, Dr Obafemi Hamzat.

    What the Lagos State Governor is saying

    Sanwo-Olu said the Red Line project which is to be fully operational in the last quarter of 2022 with 8 train stations from Agbado to Oyingbo, is another initiative of his administration to deliver enduring infrastructure for the transport system and make Lagos a competitive megacity.

    The Governor said: “Today’s flag-off of the construction of infrastructure for the standard gauge Red Line is another promise kept and it demonstrates, in practical terms, our commitment to achieve the objectives of traffic management and transportation pillar in our development agenda. This is because we recognise the role which an efficient transportation system plays in enhancing people’s quality of life and as a major driver of socio-economic development.

    The State’s Strategic Transport Master Plan, which encompasses a number of projects that are germane to achieving our vision for a Greater Lagos, is founded on imperatives that seek to increase transport choices for all users and make the transit system integrated, attractive, convenient, affordable and accessible.

    Since efficient transportation is the backbone of any economy, we are happy to be committing this investment in our transport infrastructure, so that our people can meet their daily targets and aspirations. This all-important transport project we are all gathered to witness today represents a major step in this direction.

    Sanwo-Olu said that in order to facilitate smooth operations of the Red Line, the State Government would be constructing ancillary infrastructure, including 6 overpasses at strategic level crossing points along the rail corridor to eliminate interactions between the rail system, vehicular and pedestrian traffic.

    The overpasses will provide grade-separated crossings that will enhance safety for the rail system and road users.

    He said: “The unique characteristics of the Red Line is its integration with the Ikeja Bus Terminal, Oshodi–Abule Egba Bus Rapid Transit (BRT) lane, the future Orange Line, which goes from Ikeja to Agbowa, and the General Aviation Terminal One of the Murtala Muhammed International Airport through a skywalk.

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    Another unique feature of the Red Line is that all the stations have elevated concourses with either at grade island or side platforms for easy boarding and alighting of passengers. The Red Line also integrates with our Bus Terminals at Oyingbo, Yaba, Oshodi, Ikeja and Iju, giving modal options to our people in their daily commute, either for business or leisure.”

    The Governor presented cheques of different amounts as compensation to 25 residents whose properties, businesses and accommodation will be affected by the project. Over 263 properties are affected with many of the property owners and tenants smiling as they got their cheques.

    What you should know

    • The Red Line is part of the state government’s vision of an integrated multimodal transportation system contained in the State’s Strategic Transport Master Plan (STMP), developed by LAMATA, which aims ultimately to birth a world-class transportation network that will support the state’s profile, as the economic capital of Nigeria and Africa.
    • It is to raise mass transportation capacity in the State, complementing the Blue Line that traverses from Okokomaiko to Marina.
    • The rail corridor will be constructed in three phases. The first phase (Agbado-Iddo), which will be completed in 24 months, will be sharing the track with the Federal Government’s Lagos-Ibadan Railway Modernisation Project up to Ebute – Metta and will have its dedicated track from Ebute – Metta to Oyingbo and reduce travel time from about two and a half hours to just 35 minutes.

    Stanbic 728 x 90
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