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Business News

Guinness, Int’l Brew, Nigerian Breweries spend N65.5 billion on key acquisitions in 2020

Brewers were forced to scale down the acquisition of PPE in 2020.

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International Breweries announces changes in management , NIGERIA|INTERNATIONAL BREWERIES: Cost inefficiences weigh on operating performance as financial leverage improves
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Without a doubt, the activities of top brewers in 2020 were severely impacted by the disruption occasioned by the COVID-19 pandemic. This disruption however had an impact on brewers’ capital expenditure in 2020, in a bid to expand operations through the acquisition of PPE (property, plants, and equipment).

This decline in capital expenditure in 2020 can be linked to the decline in profitability (in the case of Nigerian breweries), and losses that the likes of Guinness and International Breweries made in 2020, owing to the disruption from the COVID-19 pandemic.

Since the acquisition of properties, plants, and equipment reduced cash flow, brewers were forced to scale down the acquisition in 2020, with the view to create a sufficient buffer through the retention of cash flows and profit to weather the storm in their operating environment.

Key highlights

  • In 2020, Nigerian Breweries Plc, International Breweries Plc, and Guinness Nigeria Plc spent N37.2 billion, N17.7 billion, and N10.5 billion respectively to acquire key properties, plants, and equipment, bringing their total spendings on these acquisitions to N65.5 billion for the year.
  • In 2019, Nigerian Breweries, Int’l Breweries, and Guinness spent N29.9 billion, N56.8 billion, and N16.6 billion respectively on key acquisitions, with the total spending on the acquisitions pegged at N103.4 billion.
  • Noting that Nigerian Breweries was the only brewer who spent more on acquisitions in 2020, than the previous year 2019, and this is only right because Nigerian Breweries was the only brewer that did not make a loss in 2020.

Profit is a major determinant of PPE acquisition

The brewers’ profit in 2020 was hit hard by the disruption from the COVID-19 pandemic, a situation that started first as a health crisis but later moved on to become a deterrent for commerce and trade due to lockdown measures put in place by various countries to curb the spread of the disease.

Nigerian breweries, being the largest brewer in the country, maintained their stance in terms of generating profits year-on-year. The company was able to generate a profit of N7.37 billion from its operations in 2020 54.3% lower than 2019 figures (N16.1 billion).

From this, the leading brewer was able to pay shareholders a total dividend of N7.5 billion, translating to a dividend of 94 kobos per share.

While Guinness and International Breweries made a loss of N12.6 billion and N24.9 billion respectively, this reality impacted their ability to pay their shareholders dividends in 2020.

The top brewers’ revenues held tight despite the disruption from COVID

The top brewers however fought a good fight in sustaining their top line, as their combined revenues declined marginally from N586.9 billion in 2019 to N578.2 billion, despite the heat of the pandemic.

Only Guinness among the top three recorded a decline in revenue in 2020, as the revenue of the company declined from N131.5 billion in 2019 to N104.4 billion at the end of the financial year (June 2020).

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Nigerian breweries revenue grew by single-digit to N337.0 billion in 2020, from N323.0 billion in 2019, while International breweries, the second-largest brewer by market capitalization, recorded an increase in revenue from N132.4 billion in 2019 to N136.8 billion in 2020.

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Omokolade Ajayi is a graduate of Economics, and a certificate holder of the CFA Institute’s Investment Foundation Program. He is a business analyst, and equity market researcher, with wealth of experience as a retail investor. He is a business owner and a stern advocate of Financial literacy, who believes in the huge economic prospect of the Nigerian Payment channels and Fintech space.

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Business

Lagos agricultural sector to generate $10 billion in the next 5 years

The agricultural sector in Lagos state is projected to generate as much as $10 billion within the next 5 years.

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Lagos, Sanwo-Olu, Businesses that must remain closed after May 4
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The Lagos State Governor, Mr Babajide Sanwo-Olu, has projected that the agricultural sector in the state could generate as much as $10 billion within the next 5 years.

This is as the governor noted that Lagos could no longer afford to rely exclusively on other states for its food, adding that it was time to unlock its immeasurable agricultural potential through the implementation of the 5-year roadmap.

This disclosure was made by the Governor at the formal launch of the state’s 5-year Agricultural and Food Systems Roadmap, on Thursday, adding that most of the investments would be private sector-driven while the government acts as the catalyst and enabler.

Governor Sanwo-Olu opined that the Roadmap would also lead to wealth generation, value creation, food security, the industrialisation of the agricultural sector and the entrenchment of inclusive socio-economic development of the state.

He said that the roadmap essentially focuses on 3 pillars, which are: growth of the upstream sector, growth of the midstream and downstream sectors as well as improvement of private sector participation.

What the Lagos State Governor is saying

Sanwo-Olu, in his words, said, “Our strategies for sustainable Agricultural Development shall focus on three pillars. First, we will grow the upstream sector through interventions by leveraging technologies that are capable of lowering the cost of production of value chains; Focus on growing the midstream and downstream sectors that are of value and lastly, we will improve on private sector participation by developing and initiating policies that will encourage more private investments in agriculture.”

The projection is that the total investment in the Agricultural Sector from the government, private sector, donor agencies and development partners will run into over $10 billion in the next five years. While we expect most of the investment to be private sector-driven, the government will continue to provide the needed infrastructure while the private sector will be encouraged to lead the key projects.’

The governor pointed out that the state had already started the revamping of its Agricultural Land Holding Authority (ALHA) to support investment in agriculture, giving assurance that the coconut belt would also be strengthened with increased private sector involvement.

Sanwo-Olu listed some State’s landmark investments that will aid smooth delivery of the Roadmap to include the Lagos State Aquatic Centre of Excellence (LACE) that would boost fish production from 20% to 80%, the Imota Rice Mill, the Lagos Food Production Centre Avia, Igborosu-Badagry as well as other statewide agriculture-focused initiatives.

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He said, “I am greatly encouraged by the interest already generated in the Five-Year Agricultural Roadmap and I hope it will be sustained and backed with concrete action on the part of our development partners and the international community. I assure you that the Lagos State Government is putting in place deliberate incentives to make your investment safe, secure and profitable.’

Sanwo-Olu, therefore, urged potential and established stakeholders in the agricultural sector to partner with the state in order to transform the agricultural sector for food security, wealth generation, poverty eradication, economic diversification, rapid industrialisation and accelerated socio-economic growth.

Bottom line

This is a very laudable initiative from the Lagos State Government especially at a time the country is looking at diversifying its economy. The successful implementation of this programme with the expected benefits from the value chain will contribute significantly to the economic development of the state and the country in general.

Stanbic 728 x 90

The investment in the transformation of agriculture to agribusiness is one way of achieving the dream of attaining self-sufficiency in food production and creating more wealth.

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Business News

NNPC, SEEPCO sign gas development agreement for domestic market

The execution of the deal is to help reduce gas flaring in the country and a show of NNPC’s commitment to facilitating the country’s transformation into a gas-powered economy.

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The Nigerian National Petroleum Corporation (NNPC) and an indigenous oil exploration and production firm, Sterling Exploration and Energy Production Company (SEEPCO), both partners in the Oil Mining Lease (OML) 143, have signed a Gas Development Agreement (GDA).

The execution of the deal is to help reduce gas flaring in the country and a show of NNPC’s commitment to facilitating the country’s transformation into a gas-powered economy.

According to a tweet post from NNPC on their official Twitter handle, the agreement between both parties was signed at NNPC’s head office, NNPC towers, on Thursday, April 22, 2021.

The statement says that this latest milestone provides the terms for the development of OML 143 Gas, providing gas for the domestic market which aligns perfectly with the Federal Government’s National Gas Expansion Programme (NGEP).

What this means

The execution of this project will not only help to support the Federal Government’s effort in reducing gas flaring by monetizing it but will also play its part in the government’s effort in the expansion of gas utilization in the country as a cleaner, cheaper and more reliable alternative form of energy.

This is coming at a time when the Federal Government is shifting focus to gas utilization as an alternative source of energy especially with the increase in the retail pump price of petrol. This is one of the various initiatives by the government as represented by the NNPC towards providing alternative sources of energy.

 

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