Guinness Nigeria Plc, a subsidiary of Diageo Plc, has attributed the six per cent decline in its net sales during the Q1 2018/2019 financial year which ended 30th September, to increased competition in the value beer segment, that more than offset growth across the rest of the business.
In its unaudited financial statements for the period under review, the company noted that its increase in profit before tax was driven by lower finance charges. It said this was as a result of the N39.7 billion rights issue, which more than offset operating profit decline in the company’s challenging operating environment. It, however, declared N1.2 billion as its profit for the period under review.
Mr Baker Magunda, Managing Director/Chief Executive Officer, Guinness Nigeria Plc, noted that the company delivered a result that reflected the continued challenges in the operating environment and increased competition in the beer category.
According to him, continued inflationary pressure on raw material costs and volume declines impacted both gross profit and its operating profit. He said the profit before tax, however, benefitted from a significant reduction in net finance charges as a result of the rights issue.
“Looking forward, we will continue to focus on the three strategic pillars of productivity, expansion of our portfolio, as well as the execution of the commercial footprint initiatives to improve performance in the business.”
He further added that while the management remained optimistic about the execution of the new strategy, they took into consideration the fact that the operating environment may likely continue to be challenging for the rest of the year and even in the 2019 financial year.
The beer segment has continued to experience a stiff competition among the three major players in the country namely, Nigerian Breweries, Diageo-owned Guinness Nigeria Plc, and AB InBev-owned International Breweries.
The year 2011 ushered in a disruption in the beer market with the arrival of SABMiller and its acquisition of majority shares in International Breweries Plc, makers of Trophy Beer, located in Ilesa, Osun-State. However, in 2017, AB InBev acquired 72.17% of SABMiller’s shares in International Breweries Plc, in a series of transactions which resulted in AB InBev acquiring controlling interests in the company.
Interestingly Guinness remains the biggest in the Spirit segment while other brewers are not ready to enter this segment.
Guinness Nigeria Plc brews beer; the Company further packages and markets beverages such as Guinness Stout, Malta Guinness, Harp larger, Gordon’s Spark and other Spirits brands. Its shares are currently trading at N74.00 with its one year return down by 25.17%.