Guinness, Nigeria’s second-largest brewer, posted its second loss in at least 30 years as a recession ravaged Nigeria burns through operating lines of businesses.
Guinness, subsidiary of Diageo posted loss of N4.66 billion for the 6 months through December compared to a profit of N1.17 billiona year earlier, it said in an e-mailed statement to Nairametrics .
However, revenue was up 19 percent to N59.49 billion despite a slow growing economy. Operating losses of N89.19 million was recorded in the period under review.
The loss was due to interest expenses on obligation that include dollar denominated debt. Net finance costs were N4.50 billion while total debt in the balance sheet stood at N47.26 billion.
Guinness Nigeria is exposed to financial risk as its debt to equity ratio (D/E) increased to 130 percent in the period under review as against 86.69 percent last year.
It should be noted that the management of the company is aware of its weak financial position as it has obtained shareholders approval of a right issue of N40 billion in order to optimize its balance sheet and help mitigate the impact of rising costs on profitability. The approval was obtained at an Extra Ordinary General Meeting held on Wednesday, January 25th 2016.
Guinness Nigeria and other fast moving consumable goods are have had scarcity of foreign currency and the devaluation of naira crimp dampen sales and spiraled cost of production.
The currency lost 40% of its value in June when the central bank adopted a flexible exchange rate after pegging the naira at N197-N199 for 15 months. The policy saw cost of imported raw material soar since most firm source raw material from foreign countries.
Inflation for the month of December accelerated to 18.55 percent, the highest in 11 years. The economy is in its first recession in 25 years as it shrank by 2.2 percent in the third quarter of the year.
Guinness cost of sales (COS) increased by 54.55 percent to N43.94 billion while cost of sales ratio moved to 73.86 percent in the period under review from 57.05 percent the previous year.
The Nigerian brewer plans to invest N15.6 million in a plant in Benin City as it seeks to cut costs.
The company’s shares closed at N66 on the Nigerian Stock Exchange in Lagos. The stock is down 19 percent since the start of the year.