Guinness Nigeria records loss in third quarter
Guinness Nigeria Plc, known for its iconic Guinness stout, among other brands reported a pre-tax loss of (N448m) in the just released third quarter results ending 31 March 2016. Net income also fell into negative at (N308m). In the same period a year ago, the company recorded N2.5bn in pre-tax profit and N1.8bn net income respectively.
So what’s happened to the fortunes of Guinness Nigeria? It is known that consumer goods companies in the country, including brewers are going through trying times with a severe macro-economic headwinds of low global oil price, double-digit inflation, and decrease in consumer spending, difficulties sourcing FX to buy raw materials, among others. Guinness Nigeria appears to have been severely impacted by these challenges.
The company’s Managing Director/Chief Executive Officer, Mr. Peter Ndegwa, had this to say, “Third quarter sales were impacted by a tough operating environment and the lapping of a very strong quarter in the previous year – particularly with distribution gains for the Orijin brand. The economic slowdown and rise in inflation continue to cause a shift towards lower margin value products.
“However, we are starting to make progress in the broadening of our portfolio and also seeing resilience in our core brands. We are also focused on driving efficiency throughout our operations to address the continuing pressure on margins. We anticipate that the year will be challenging as we incur one-off costs to reshape our business and continue to broaden our portfolio in order to drive future growth.”
Analyst at FBNQuest believe that Guinness myriad of challenges were compounded because the brewer does not have strong competing brands in the value beer segment like its rivals, Nigerian Breweries and SABMiller, as consumers switch to lower priced brands in difficult economic times. They add that Orijin alcoholic drink which has been a big revenue earner for the company in the past may have slowed in the current results.
They also point out that Guinness may have been severely constrained with sourcing FX to import needed raw materials as using local sources is still very expensive. They add that the brewer may have also been weighed down by difficulties sourcing fuel in the last few months as there might have been issues with logistics and distribution of its products.
Guinness third quarter revenue declined 33% to N19.8bn, from N29.5bn in the same quarter in 2015.