In what is beginning to look like an all too familiar tune, Heineken the beer maker and parent company of Nigeria’s largest brewer Nigeria Breweries has reported that the forex crisis in Nigeria is beginning to take a toll on its earnings.
The worlds third largest brewer revealed this in its Q1 presentation for 2016, where it also recorded volume growth from Africa mostly backed by significant increases in Nigeria. The company explained that Organic consolidated beer volume growth of 4.6% was driven by growth in Nigeria and Ethiopia. It also stated that excluding Nigeria, volume would have been down organically for the region.
Nevertheless, challenges remained in Nigeria particularly in the forex space where it has become increasingly difficult for the company to access foreign exchange.
In Nigeria volume was flattered by an easy comparative given the election in the same period last year; cycling the forthcoming quarters will be more difficult. Underlying trading conditions remain tough and the weaker consumer environment, due to the low global oil price, continues to drive negative brand mix. It is becoming increasingly challenging to obtain hard currency in the market, and the uncertainty regarding a possible devaluation of the Naira continues to impact the business adversely.
This is not the first company complaining about the forex situation in Nigeria. Nigeria has also been yanked off the JPM Bond Index and is facing a threat of being removed from the MSCI Emerging Market Index which is mostly relied upon for foreign portfolio investment into the Nigerian Stock market.
Investors in Nigerian Breweries will however see this result as encouraging and will thus expect this to reflect in Nigerian Breweries numbers. Value brands have eroded top line volumes sales for its more premium brands such as Star lager as Nigerians switch to cheaper beers. Nigeria Breweries reported a 1.4% growth in sales in the first quarter of 2015 and 10% growth in the full year ended December 2015. It is expected that sales in the first quarter will top last years margins.