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Mixed fortunes for Nigerian Breweries Plc as the Brewery sector moribunds

Half-year results from different brewing companies have revealed that the entire sector in Nigeria may be moribund.

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Heineken scoops more Nigerian Breweries shares in insider disclosure

Nigerian Breweries Plc is the pioneer brewing company in Nigeria. They are in the business of beer brewing, marketing and selling of alcoholic beverages and are responsible for a host of drinks that have flooded the Nigerian market, for example, the Star Lager, Guilder, Stout, Goldberg, 33, Ace-root, Radler and many others

Analysis of Half-year results from different brewing companies have revealed that the entire sector in Nigeria may be moribund. Many companies posted a loss with few others grateful to breakeven.

However, the brewery company giants seem to have witnessed better realities when analysed side by side with any of its competitors. In H1 2020, Nigerian Breweries Plc experienced an 11% reduction in revenue. Dropping from N170B in 2019 to N151B in 2020 but were still able to close their book with a profit.

READ: Nigerian Breweries’ Q1 earnings report shows profit decreased by 31.4% to N5.5 billion

Q1 and Q2 presented mixed fortunes, with Q2 particularly unpalatable. The net profit margin in Q2 stands at 0.1% as against Q1 at 6.6%. Whilst other expenditures accounted for immaterial differences, there was a notable spike in finance cost in Q2. It increased by N1.5B from Q1. The implication is that more debts had been incurred as shown is the jump in loans and borrowing under the Current and Non-Current Liabilities, from N20B in Q1 to N26B in Q2 and N78B in Q1 to N112B as at the end of Q2 respectively. This takes its toll on the Q2 PAT figure generating just N83.9million compared to Q1 PAT of N5.5billion representing a colossal 98% decline. Rising finance cost is not solely responsible for this; a decreased gross profit margin from 41.9% in Q1 to 35.2% in Q2 also reflects a worsened ‘revenue to cost of sales’ relationship in Q2.

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The COVID-19 pandemic has hugely been responsible for the poor turnover recorded by brewery companies around the country. The lockdown initiated to manage and contain the virus spread in a bid to preserve lives, unfortunately, have had severe repercussions for these businesses, it has all but signed their death sentence, sales have plummeted and will make little improvements in subsequent quarters if a strategy isn’t devised to market the products and improve sales whether or not the lockdown is relaxed fully.

Nigerian Breweries Plc recorded a negative of N1.1B in cash generated from operations in Q1. Despite the H1 result showing improvements to the tune of N9.4B, the Brewery Company must strive to always maintain a positive net cash flow from operations in the ensuing quarters. Businesses can generate cash from multifarious avenues, whether through returns on investments (ROI), financing activities, etc., it almost always signifies doomsday if a company consistently fails to generate actual cash from its primary operations and always have to be cushioned by its ROI. Many investors frown at this.

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Overall, Nigerian Breweries has a strong balance sheet of about N430 billion. It is not highly geared and increasingly makes investments in CAPEX. During the six-month period ended 30th June 2020, the Company acquired plant and equipment with a cost of N14.6 billion (six-month period ended 30th June 2019: N11.7 billion).

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Effects of the pandemic are still evident, but it seems very likely that Nigerian Breweries survives this severely trying time for the industry even if others may not.

Ekene Onyeama is a Chartered Accountant currently plying one of the Tier one Banks in Nigeria. He started out his career at Ideascorp Limited, a private company in the hospitality industry where he served as the accountant before switching to banking. Ekene enjoys analyzing companies. He likes to write and is very excited by company valuations. He can be reached on Twitter @Ekenergy_

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Companies

Neimeth Pharmaceuticals to raise N5 billion in additional equity

The Board of Neimeth is set to raise N5 billion additional equity upon the approval by shareholders of the company at the AGM.

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Neimeth Pharmaceuticals
The Board of Directors of Neimeth Pharmaceuticals has revealed plans to raise N5 billion in additional equity upon approval by shareholders of the company.
The information was contained in a press release published on the NSE and signed by the Company Secretary, Mrs. Florence Onhenekwe.

The disclosure is part of the resolutions reached at the Board of Directors meeting of 15th January 2021. At the end of the meeting, it was resolved that the company would raise additional equity to the tune of N5 billion.

In line with this development, a board resolution proposing to raise equity will be presented at the Annual General Meeting of the Company scheduled to hold on 9th March 2021.

What you should know

  • The Board of the Company is yet to disclose if the additional equity would be a rights issue or a private placement, as the details of the additional N5 billion equity set to be raised are yet to be finalized.
  • The fund will help the company’s management to execute key strategies that will reposition the company as a leader in the healthcare industry, with the hope to deliver better returns on investment to shareholders.
  • The additional equity financing will also increase Neimeth’s outstanding shares, which will dilute earnings and impact the Company’s stock value for existing shareholders.
  • The move has the potential to trigger a sell-off of the company shares on the Nigerian Stock Exchange.

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Companies

Cutix Plc forecasts N148 million profit in Q4 2021

Cutix Plc has projected that its revenue will double and profit will increase by 9% to N148 million.

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Cutix Plc, dividend

Cutix Plc has projected that in the fourth quarter of its financial year 2021, its revenue will double and profit will increase by 9% to N148 million.

These projections were made by the company in a recent earnings forecast issued by the Management, and signed by the Company’s CEO and CFO.

READ: Vitafoam shares gain 9.6%, as company reports N4.11 billion as profit in 2020

Key highlights of the earnings forecast for Q4 ended April 30, 2021

  • Revenue to increase to N1.66billion, 100% Q-o-Q.
  • Cost of Sales to increase to N1.16 billion, 70% Q-o-Q.
  • Distribution, Admin & Other expenses to increase to N232.89 million, 14%% Q-o-Q.
  • Other Income to remain unchanged at N2.50 million,
  • Finance Charges to increase slightly to N47.38 million, 3% Q-o-Q.
  • Operating income to increase to N227.83 million, 14% Q-o-Q.
  • Taxation is projected at N79.74 million.
  • While Profit attributable shareholders is projected at N148.10 million.

READ: Royal Exchange Plc forecasts N500.83 million PAT in Q1 2021

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Bottom line

The earnings forecast was made on the ground that the Nigerian economy will continue improve, as the country recovers from the impact of COVID-19. In this regard, revenue in the fourth quarter of 2021 will be slightly higher than the revenue projected in the third quarter of 2021.

READ: Okomu Oil Plc records 27.01% decline in 2020 Q3 revenues

However, the increase in the cost of sales driven by the input cost will pressure profitability to the tune of N148.10 million, which is 9% higher than the profit after tax made in the corresponding quarter of 2020.

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PZ Cussons proposes dividend payout of N397 million to the shareholders

The Board of Directors of PZ Cussons Nigeria Plc has proposed the payment of N397 million to the shareholders of the company.

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PZ Cussons Plc, PZ Cussons Nigeria Plc

The Board of Directors of PZ Cussons Nigeria Plc has proposed the payment of N397.047 million to the shareholders of the company who currently hold the 3,970,477,045 fully paid ordinary shares of the company.

This disclosure was made public by the company in a notification issued and signed by the Company Secretary, Jacqueline Ezeokwelume, today the 7 January 2021.

She explained further that if the dividend of ten (10) Kobo per share recommended by Directors is approved by members at the Annual 72nd General Meeting, the dividend payments will be made on Monday, 1 February 2021.

What you should know

  • The Register of Members and Transfer Books of the Company will be closed from Monday, 11 January 2021 to Friday, 15 January 2021 (both dates inclusive) for the purpose of preparing an up-to-date Register of Members.
  • However, only shareholders whose names appear in the Register of Members and Transfer Books at the close of business on 19th October 2020 will receive the dividend on Monday, 1 February 2021.

What they are saying

Mr. Gbenga Oyebode, MFR, the Chairman of PZ Cussons Nigeria Plc, in his address said:

  • “Fellow shareholders, the Board of Directors is recommending to the shareholders at this AGM, a dividend pay-out of N397,047,700 representing 10 Kobo per share (2019: 15 Kobo per share). If approved, the dividend will be paid to shareholders on Monday, 1 February 2021 after deducting the appropriate withholding tax.”

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