Companies
Despite intensive advertising, International Breweries reported lower revenue and a loss
Despite aggressive marketing and advertising strategies in 2019, International Breweries Plc reported a drop in revenue and a loss.
By all means, International Breweries Plc was very aggressive with its marketing and advertising strategies in 2019. However, it appears that the effort did not quite reflect in the brewer’s bottom line. This is because not only did revenue drop, there was a loss after tax of N9.1 billion in Q4 2019.
International Breweries is the second-largest brewer in Nigeria in terms of market share, having overtaken Guinness Nigeria Plc last year. As you can expect, aggressive advertising has been majorly instrumental in this regard. But advertising can be expensive. In Q4 2019 alone, the company incurred more than N6 billion in advertising costs.
According to information obtained from the company’s unaudited Q4 2019 financial report, advertising expense was 64.9% more than N4.2 billion, which was recorded during the comparable period in 2018.
Money well spent?
The company’s adverts were dropping everywhere throughout last year. Across media platforms such as radio, TV, print, and on the internet, beer drinkers were bombarded with communication messages encouraging them to patronise the brand.
International Breweries also made copious use of celebrity endorsements to push its brands, including Budweiser, which it describes as the “king of beers”.
[READ MORE: International Breweries’ Q4 2019 result shows 5.8% revenue drop, N9.1 billion loss)
At the end of the year, the company did sell its products, but not as much as it expected to. Total revenue for the 3-month period ended December 31st stood a little bit above N35 billion, indicating a 5.8% decrease when compared to N37.3 billion that was recorded in Q4 2018.
Although the ads were everywhere, very colourful and fascinating as they were, they did not quite translate to more sales, let alone an increase in profit.
What could be responsible for the huge loss
International Breweries Plc has yet to offer an explanation as to what is responsible for the recorded under-performance. Results for the three quarters ended September 2019 showed a loss after tax of N16.4 billion, even as operating expenses grew significantly by 33.1% to N33.1 billion, driven mostly by a surge in marketing promotion expenses and administrative expenses. See here.
Perhaps the company will offer a full explanation when it releases its audited financial statement for full-year 2019.
In the meantime, it should be noted that the company reported net finance costs of N9.2 billion in Q4 2019. The administrative expense for the period stood at N8.2 billion as against N3.7 billion in Q4 2018.
The company’s stock closed Tuesday’s trading on the Nigerian Stock Exchange at a share price of N7.05.
Companies
Flour Mills moves to diversify funding sources with N29.8 billion bond listing
Flour Mills Nigeria Plc lists N29.8 billion bonds to diversify funding sources from the Nigerian capital market.
Flour Mills Nigeria Plc’s fresh N29.8 bond listing will help the nation’s leading food business company to explore diversified funding sources from the Nigerian capital market, with the hope of enhancing growth and the development of the company.
This statement was made by the Group Managing Director of FMN, Mr. Omoboyede Olusanya, at the listing of the Tranche A and Tranche B bonds valued at N29.8 billion on the Nigerian Stock Exchange (NSE).
The food and the agro-allied company which has remained Nigeria’s largest and oldest integrated agro-allied business with a broad profile and robust Pan-Africa distribution issued these bonds under its N70 billion Bond Issuance Programme.
Olusanya said that the company would continue to explore funding opportunities inherent in the capital market to ensure business growth and continuity.
While speaking about the Credit Rating of the Programme, he disclosed that FMN’s credit rating, as well as the operational financing of the Group, have improved considerably.
According to him, the bonds floated by Flour Mill will help to strengthen the company’s capital base and provide the needed working capital required by the Company. He added that Flour Mills Group will continue to deleverage and replace short term financing with longer-tenured and lower price funding to optimize capital structure and reduce financing cost.
He noted that Flour Mills will continue to explore opportunities to raise fundings via the capital market as this enables the company to diversify its funding sources and continue to play a role in the capital market as a significant player in it.
What they are saying
The Group Managing Director of FMN, Mr. Omoboyede Olusanya, at the virtual event, said;
- “We are delighted with the response from the market, we are happy to be listed.
- “We are introducing an N29.9 billion listing under an N70 billion bond issuance cover; we will continue to raise funding to diversify our funding sources.
- “The company remains passionate about feeding the nation to improve the quality of living for Nigerians through increased production and investments in backward integration.”
What you should know
- With the successful issuance of the new N29.8bn Tranche A and Bonds, FMN has utilized its bond issuance program registered in 2018.
- It is important to note that the Senior Unsecured bond listing includes an N4.89bn under Series 4 Tranche A of the bond issuance programme, at a 5.5% rate for 5 years, due by 2025, and a 25bn under Series 4 Tranche B of the same program at a 6.25% rate for a tenure of 7 years, due by 2027.
- The bond proceeds will be used to refinance existing debt obligations. It will also help the company take collaborative actions to diversify the company’s financing options beyond expensive short term debt.
Business
Lafarge moves to divest 35% shareholding in CBI Ghana
Lafarge Africa Plc has resolved to sell off its 35% shareholding in Continental Blue Investment Ghana Limited.
Companies
Multiverse forecasts N39.5 million profit in Q1 2021
The management of Multiverse Plc has projected a revenue of N76 million and a profit of N39.5 million in Q1 2021.
Multiverse Mining and Exploration Plc has projected that in the first quarter of 2021, the mining and exploration company will generate N76 million in revenue, and post a profit of N39.5 million.
These projections were made by the company in a recent earnings forecast issued by the Management, and signed by the Corporate Secretaries of the company.
Key highlights of the earnings forecast for Q1 2021
- Total revenue is projected at N76 million.
- Turnover from agency sale is projected at N1 million.
- Agency cost is s projected at N850 thousand.
- Total expenses are projected at N7.8 million.
- Operating Profit is projected at N67.3 million.
- EBIT (Earnings Before Interest and Taxation) is projected at N67.3 million.
- Interest Expense is projected at N27.8 million.
- Profit after tax is projected at N39.5 million.
Key assumptions made to support the earnings forecast and projection of the company
The earnings forecast was made on the ground that there won’t be any significant change in the economic policies of the Federal Government, while the monetary policies of the CBN would not be altered significantly.
The company also maintained that there would not be any industrial unrest that would affect its production and sales volume, while the profit of the company would not be pressured by rising costs of inputs, as prices of materials used in production shall be stable in the period under review.
Paul Ovat
February 19, 2020 at 1:29 pm
Welldone on the analysis.
Below is my personal opinion of the IB results.
– Potential investors should give consideration to the just concluded right issue, which will significantly lower finance charges to around 5billion in 2020, thus net profit will become positive. This will make it one of the lowest in its industry
– The company is still largely competing to gain market share, increase in marketing expense maybe driven by this.
Kasa
February 19, 2020 at 4:01 pm
Advertising is not everything afterall