Guinness Nigeria Out Of The Red, Nets N1.2bn At Full Year
Guinness Nigeria Plc managed to pull out from a loss of N12.6 billion last year and closed the 2021 financial year in June with an after-tax profit of N1.2 billion. This is in line with our expectation for a return to profitability by the brewing company in the second half.
The critical factor for the huge loss last financial year is an impairment loss of N11.7 billion on property, plant and equipment.
Also, the return to profit in the 2021 financial year reflects a sharp drop in impairment loss to N533 million at the end of the year.
Another major favourable development in the year happened on the side of revenue. The good news of improving sales revenue seen in the interim reports was sustained for Guinness to a full year. The company changed the trend from declining turnover to outstanding growth in the year.
Sales revenue accelerated through the year from less than six per cent at the end of the second quarter to roughly 20 per cent at the end of the third quarter and further to the region of 54 per cent at full year.
Guinness Nigeria saw the strongest growth in sales revenue during the financial year at 53.7 per cent to over N160 billion at full year. The company succeeded in realising the big leap in sales revenue we had underscored as the critical factor for Guinness to trim its losses and possibly rebuild profit.
The company has recovered from a two-year drop in turnover that registered the lowest sales revenue figure for the company since 2017. It had lost as much as 21 per cent of sales revenue in the 2020 financial year.
The closing profit for the company is however a drop from the N1.8 billion after-tax profit it posted for its nine months of trading at the end of March 2021. A big increase in tax expenses from N1 billion at the end of the third quarter to N4.5 billion made the difference.
Two major challenges observed in the interim followed the company to a full year. The first is input cost, which grew well ahead of sales revenue at 61.6 per cent year-on-year to close in the region of N115 billion.
The second is a relatively huge tax expense of N4.5 billion, which consumed 78 per cent of the pre-tax profit of N5.8 billion at the end of full-year operations. This is against a tax credit of N4.5 billion in the preceding year.
Despite the high growth in the cost of sales, the company still raised gross profit by 37 per cent to about N46 billion at the end of the financial year.
Further support came from an outstanding increase in other income, which more than doubled at 105 per cent to over N1 billion. Also, administrative costs went down by close to 27 per cent to N10.5 billion.
Again net impairment losses on financial assets that were over N2 billion in the preceding financial year turned around to a net impairment gain of N229 million over the review period.
However, marketing and distribution expenses failed to follow the direction of cost moderation and grew by about 41 per cent to N26 billion. The drop in impairment loss on property, plant and equipment covered a lot of ground for the company in terms of cost savings.
The drop enabled the company to build an operating profit of close to N10 billion at the full year, a big turnaround from an operating loss of N12.8 billion in the 2020 financial year.
The company’s management trimmed finance expenses and a marginal decline in net finance expenses was recorded at the end of the financial year. It cut down borrowings from nearly N23 billion at the end of the last financial year to N16 billion at the end of the 2021 financial year.
The company earned 57 kobo per share at full-year against a loss of N5.74 per share in the same period in the preceding financial year.
insidebusiness.ng
