Champion Breweries Plc remained at a ten year low in last week’s trading session. The stock opened last week at N1.32, briefly dipped to N1.21 in intraday trading, but closed flat.
Year to date, the stock is down 33.67% and is the worst performing stock in the breweries space.
Reasons for the fall
The poor share performance is industry, as well as company specific.
Most of the listed brewers on the exchange have underperformed the NSE All-Share Index, which is down 4.28% year to date.
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Nigerian Breweries is down 23.98% year to date.
International Breweries is also down 24.59% year to date.
Guinness Nigeria is down 16.67% year to date.
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A challenged space
The sector remains challenged by the relatively weak economic performance and the increasing consumption of value brands. Excise duty increases last year, also constituted a drag on performance.
On a company-specific level, Champion Breweries delivered poor full year 2018 results. Revenue was flat at N4.7 billion, while the company recorded a loss after tax of N263 million, as against a profit after tax of N517 million attained in the 2017 financial year.
The company attributed this to an increase in excise duties and a challenging operating environment.
In 2018, the results of the company, were adversely impacted by the increased excise duties rate which came into effect during the year, coupled with a challenging operating environment
Excise duties in particular spiked from N103 million in 2017 to N311 million in 2018. Fierce competition in the brewery space has left the players unable to pass on these costs to customers.
How low it will go?
The stock’s performance, in the medium term, will again be determined by both company–specific factors, and overall market sentiments.
If the company’s Q1 2019 results show a decline, the stock could drop further. First quarter results tend to be relatively weak for brewers.
Champion Breweries has yet to craft a strategy which will enable it stay afloat in an industry with tight competition.
On a monthly and quarterly basis, the NSE All Share Index is down 3.08% respectively. There appear to be no triggers for an upswing, as the government is yet to draw up its agenda for the current year.
About the Champion Breweries Plc
Champion Breweries Plc was incorporated on 31st July, 1974 as a private limited liability company under the name, South East Breweries Limited. This was changed to Cross River Breweries Limited and then its current name. It was converted to a public limited company in 1992, and listed on the Nigerian Stock Exchange on September 1, 1993.
The Company’s principal activities are the brewing and packaging of Champion Lager Beer and Champ Malta as well as the provision of contract brewing services to Nigerian Breweries Plc, a related party within the Heineken group
Raysun Nigeria Limited (a subsidiary of Heineken) holds 60% of the company’s issued share capital.