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Guinness Nigeria boss reveals factors pulling company’s profit

Guinness laid issues like port congestion, tax reforms and decline in alcohol pricing have eaten deep into the company’s profit, affecting the operations of the company.

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Baker Magunda, Guinness Nigeria Plc, Baileys, Why Guinness is a stock to pick - RenCap 

The management and investors of Guinness Nigeria Plc are currently not smiling and that is connected to some factors that have eaten deep into the profit of the company. This was disclosed by the Managing Director of the firm, Baker Magunda in Lagos.

A far as the Guinness boss is concerned, Nigeria’s business environment has not been favourable for his company and provoking to the ease of doing business in the country.

Listing issues that have eaten deep into the company’s profit, Magunda outlined port congestion, tax reforms and decline in alcohol pricing. According to him, they have been affecting the operations of Guinness Nigeria and that the company has been burning cash to transport its products across the nation.

He added that the company is also struggling with government policies like the increased excise duties on beer and stouts, which was rose to N0.30 kobo per centilitre (Cl) in 2018 and N0.35 kobo per Cl each in 2019 and 2020.

Also, President Muhammadu Buhari-led administration had increased VAT rate from 5% to 7.5%, as well as implementing other tax reforms that have caused inflation pressure.

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Nigerian Breweries reports reduced profits for first three quarters of 2019 , Analysis: Nigeria Breweries, the glory days are gone, Guiness Nigeria becomes latest casualty as alcoholic companies get pummeled by Buharinomics 

Governments excuse for hike in alcohol tax: The upward review of the excise duty rates for alcoholic beverages and tobacco was not targeted at local manufacturers, according to former Finance Minister, Kemi Adeosun, but aimed at achieving a dual benefit of raising the government’s fiscal revenues and reducing the health hazards associated with tobacco consumption and alcohol abuse.

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(READ MORE: NAFDAC Fines Guinness N1Billion For Violating Rules)

But as the government increases its revenue and reduces abuse of alcohol consumption, the return on investment of alcoholic companies is being depleted. It is affecting consumers’ purchasing power, which in turn affects the bottom-line of the alcoholic beverage companies.

“The profit margin has reduced significantly. The overall pricing on alcohol has declined over the last four years. The inflationary trend has moved from 11% to 12%. There has been an increase in tariff. There is congestion at the ports, it costs the company over N700,000 to transport a container from the Apapa port to our factory at Ogba in Ikeja area of Lagos,” he added. 

While investors and analysts await its full-year 2019 financial scorecard, Nairametircs had reported in October 2019 that the three-month period ended September 31, 2019, Guinness Nigeria’s gross profit was N7.9 billion, a significant drop compared to the N9.1 billion the company recorded during the corresponding period in September 2018. Meanwhile, its revenue for the 2019 period dropped by 4.2% to N26.8 billion, from N28 billion in the three-month period ended in September 2018.

Will Guinness navigate challenges? This is a tough call considering the fact that the company had been reporting a drop in profit and revenue even before the new tax reform took effect in February 2020. Aside from the tax reforms, the Lekki Port is still under construction, with no end in sight.

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But Guinness Nigeria is looking to introduce new products into the market in order to stay competitive and remain relevant, as it is currently the third-largest market shareholder (22.1%) in the industry, which has International Breweries and Nigerian Breweries.

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“We are not relenting, we will continue to be strategic in our thinking concerning our product line. There is the possibility that we might add new products to our product line. The spirit is the future, we might invest in spirits too. It is easier and cost less to distribute, it is one-way distribution, that is the future,” Magunda said.

 

International Breweries announces changes in management , Guiness Nigeria becomes latest casualty as alcoholic companies get pummeled by Buharinomics 

(READ MORE: Nigerian Breweries goes to the retail lab)

Market rivals taking the hit too: The harsh business environment in Nigeria has been unfriendly to the bottom-line of companies operating in the alcoholic market, with companies like Nigerian Breweries spending N77.6 billion last year on advertising and marketing to maintain its 55.5% market lead. But despite the big-budget for media ads, the company recorded a profit after tax of N16 billion in 2019, compared to the N43 billion it earned in 2013 while incurring an external debt of N55 billion in 2019, a sharp increase from the N9 billion in 2013.

The story was even worse for International Breweries – the second-largest market shareholder (22.4%), which incurred more than N6 billion in advertising costs at Q4 2019, only to record revenue drop and a loss after tax of N9.1 billion in Q4 2019. The total revenue for the 3-month period ended December 31 stood a little bit above N35 billion, indicating a 5.8 per cent decrease when compared to N37.3 billion that was recorded in Q4 2018.

Olalekan is a certified media practitioner from the Nigerian Institute of Journalism (NIJ). In the era of media convergence, Olalekan is a valuable asset, with ability to curate and broadcast news. His zeal to write was developed out of passion to shape people’s thought and opinion; serving as a guideline for their daily lives. Contact for tips: [email protected]

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Hospitality & Travel

COVID-19: Lufthansa resumes flights to Nigeria after 8 months suspension

After eight months of suspension due to the Coronavirus pandemic, Lufthansa Airline has resumed its flights to Nigeria.

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Lufthansa Group appoints Adenike Macaulay as GGM

Lufthansa Airline has resumed its flights to Nigeria after eight months suspension due to Coronavirus pandemic. The first Lufthansa flight arrived in Lagos on Thursday, 03 December 2020.

This was disclosed in a statement issued by the airline on Friday and seen by Nairametrics.

According to the airline, it is expected to do up to eight weekly departures scheduled from Lagos and Abuja Airports to Frankfurt. The German carrier also will offer up to five weekly departures from Lagos to Frankfurt and starting on 08 December also connect the capital Abuja with three weekly departures.

Adenike Macaulay, General Manager, Nigeria & Equatorial Guinea Lufthansa Group Airlines, said, “All intending travellers to Nigeria must have tested negative for Covid-19 as PCR test in the country of departure pre-boarding. The PCR test must be done within 120 hours before departure and preferably within 72 hours pre-boarding. International travellers will require a second test to be done in Nigeria, seven days after arrival.

“All long-haul flights depart from Nigeria in the evening as overnight flights, arriving in Lufthansa’s main hub Frankfurt in the early morning. This allows all passengers from Nigeria to get the full choice of connecting flights to European, American and Asian destinations, leaving all from the same terminal 1.

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‘’As we have received the final permission to reopen our flight operations, we are happy to be the first airline to reconnect Nigeria directly to the centre of Europe and onwards to all other continents. We offer a considerable number of flights to the US and Canada, allowing our Nigerian guests to have family members and friends again at reach throughout the world. Health and safety continue to be our top priority and we are committed to maintaining strict adherence to hygiene regulations for all our flights.”

What you need to know

Nairametrics had reported when Lufthansa notified its patrons of the suspension of all flights out of Nigeria from 23 March 2020 to 19 April 2020. This was disclosed in an email sent by the airline through its agency, Lufthansa City Centre TIFA Travels and seen by Nairametrics.

In the notification, the airline explained that the decision was due to the current global situation and to curb the spread of Coronavirus, also known as COVID-19. It read,

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“Lufthansa flights out of Nigeria are hereby suspended from 23 March 2020 until 19 April 2020. The last flights from Lagos, Abuja & Port Harcourt will operate on Sunday 22 March 2020, to resume on 20 April 2020 as currently planned.

Due to the uncertainty surrounding the spread of COVID-19 in Nigeria, its offices were closed to walk-in customers until further notice, however, “we can be reached via telephone lines of our ticketing offices and reservation e-mails. We hope for your understanding as we would do our utmost best to ensure a quick response to your requests.”

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Companies

Abbey Mortgage Bank Plc projects N60.13 million profit in Q1 2021

Abbey Mortgage Bank Plc has projected a Profit after Tax (PAT) of N60.13million in its 2021 Q1.

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Abbey Mortgage Bank announce the appointment of substantive Managing Director, and 5 Directors.

Abbey Mortgage Bank Plc has projected a Profit after Tax (PAT) of N60.13million in its 2021 Q1.

According to the earnings forecast issued by the bank and seen by Nairametrics, it projected the 134.7% Q-o-Q rise from a loss of N173.49 million recorded in its most audited financial statement for Q3, 2020.

key highlights of its earnings forecast for Q1 2021 when compared with Q3 2020 figures include;

  • Pre-tax profit increased to N88.4 million, +151.5% Q-o-Q.
  • Interest income increased to approximately N515.9 million, +55.45% Q-o-Q.
  • Net operating income increased to N421.94 million, +79.9% Q-o-Q.
  • Interest expense increased to N208.06 million, +63.95% Q-o-Q.
  • Operating expenses declined to N333.52 million, -17.9% Q-o-Q.
  • Credit loss expense increased to N19.83 million, +100% Q-o-Q
  • Gross earnings of N649.83 million
  • Taxation of N28.3 million
  • Other income of N133.84 million.

Bottom line

Despite recording not too impressive results in its last financial statements, the firm is, however, optimistic going for Q1 2021 as reflected in its forecast.

This optimism might be premised on the news of a positive general economy by Q1 2021, which will trickle down to various sub-sectors of the economy.

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Economy & Politics

Nigeria needs $3trillion in 30 years to reduce infrastructure deficit – Osinbajo

Vice President Yemi Osinbajo has stated that Nigeria will need $3trillion in the next 30 years to reduce its infrastructural deficit.

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Solar, FG to slash import duties on tractors, buses, others in 2020 Finance Bill, Nigeria will not issue Eurobonds, says Vice President Yemi Osinbajo, FG guarantees mortgage loan to low income buyers at low interest rate, FG inaugurates gold refinery project in a landmark event

The Vice President, Yemi Osinbajo has said Nigeria will need $3trillion in the next 30 years to reduce its infrastructural deficit.

He disclosed this while featuring at a webinar organized by the Bureau of Public Enterprises (BPE).

Osinbajo told the webinar that Nigeria needs to adopt new models of investments for infrastructural developments because relying on public expenditure alone is not sustainable.

READ: How digital transformation will impact Nigeria’s projected $8.79 billion economic expansion

The seminar discussed the roles of Public-Private Partnership (PPP) in developing Nigerian infrastructure. The Vice President said Nigeria still face a huge infrastructural deficit, despite government investment which is a roadblock to rapid economic growth.

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The Federal Government recognizes this fact, which is why we are considering other approaches to complement and boost financing for the development and maintenance of infrastructure in Nigeria.

READ: Nigeria’s Broadband subscriptions peak at 82.7m – Prof. Danbatta

“It is clear that this deficit can only be made up by private investment. Private sector is 92 per cent of GDP, while the public sector is mere 8 per cent. So, the synergy between the public and private sector through Public-Private Partnerships (PPP) is really the realistic solution.

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“The fact that only N2.49 trillion was appropriated for capital expenditure in 2020, reflects the importance of deliberate and pragmatic action to boost infrastructural spending.

READ: #EndSARS: Infrastructure and Works, Education, 3 others are prioritised in Lagos’ 2021 budget

“It seems to me to be quite clear that the financial outlay and management capability required for infrastructural development and service delivery outstrip the financial and technical resources available to government.

“In other words, the traditional method of building infrastructure through budgetary allocations is inadequate and set to become harder because of increasingly limited fiscal space,” he said.

READ: FEC okays FMBN’s request to purchase banking application software for N487.39 million

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He revealed that the FG has launched a series of PPP’s to enable Nigeria meet its infrastructure deficit needs, citing the roles of agencies like the BPE with PPP’s.

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The Federal Government has recently issued a circular on the administration of PPP projects in the country to provide the much-needed clarity.

READ: AfDB to support FERMA with $10 billion for roads, others 

“The circular re-emphasises that the BPE shall be responsible for the concession of public enterprises and infrastructure already listed in the First and Second Schedules of the Public Enterprises Act.

“The circular equally stipulates that the BPE shall act on behalf of the Federal Government, as the counterparty on all infrastructure projects being developed on a PPP basis,” he said.

READ: CBN launches Private Sector-led Accelerated Agriculture Development Scheme

He disclosed that the Infrastructure Concession Regulatory Commission (ICRC) would continue to act as the regulatory agency for PPP transactions, with directives including inspections and monitoring PPP projects.

“It is expected that this new policy direction would provide clarity to stakeholders and foster the improvement of PPP programmes in the country.

“Ministries, Departments and Agencies, as well as the multilateral agencies and our development partners are urged to support the PPP policy objectives and institutional arrangements already put up by government,” he said.

READ: FG says vehicle owners to pay N250,000 to convert from petrol to autogas

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What you should know 

  • Nairametrics reported last month that Moody Investors Services revealed that Nigeria needs to spend about $3 trillion in over 30 years to bridge the infrastructural gap experienced in the country.
  • The Minister of Works and Housing, Babatunde Raji Fashola, revealed that the Federal Government needs at least N500 billion annually for the next 3 years to develop and fix its 35,000 kilometres road network, as work continues on 13,000 kilometres of the network.
  • Nairametrics also reported last month that the FG approved the establishment of an infrastructure company that will be wholly focused on critical infrastructural investments in the country.

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