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.
- 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).
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.