Guinness Nigeria Plc on Friday reported a net loss of N2.2bn in its first quarter results ending 30th September, further worsening its financial condition. The brewer which has been hard hit by the recession cited higher input costs, unfavourable currency translations with regards to Naira devaluation and unavailability, and a weak consumer spending which has shifted its preference towards value brands.

The company had earlier in September declared a net loss of N2bn in its 2015/2016 full-year results which ended in June 2016, blaming it on a weak economic environment and foreign exchange headwinds.

In the first quarter results (July –Sept), the brewer reported a 6% growth in sales to N23bn, from N21.7bn in the previous year. However, a 32% jump in cost of sales to N16bn, from N12bn eroded the gains, pushing gross profit lower by 29% to N6.6bn, from N9.3bn. Operating profit fell 53% to N685m, from N1.4bn in 2015. Net finance cost added to the brewer’s woes, rising 212% to N2.9bn, from N930m. The result was a net loss of N2.2bn.

Speaking on the latest results, Peter Ndegwa, Managing Director/CEO, Guinness Nigeria Plc, said the revenue growth was driven in part by contributions from its new mainstream and international premium spirits business as well as the continuing growth of its value brands. He added that the revenue growth was in spite of continuing challenges in the operating environment.

“The environment remains tough but we have seen contributions from our mainstream and international premium spirits brands as well as continuing growth of Satzenbrau. These were the key drivers of the 6% revenue growth recorded for the quarter. Our cost of sales was impacted by the high inflationary environment and continuing currency devaluation leading to a reduction in operating profit. The higher finance cost in the quarter is due to the impact of unrealized foreign exchange losses as a result of the currency devaluation”.

“Going forward, innovation will continue to be a big part of our strategy as we look to deepen our participation in the mainstream and value segments. We will also continue to invest behind our brands with a key focus on building the right portfolio for future growth and re-shaping our organization to take advantage of what is likely to continue to be a challenging market in the short to medium term” he added.

Guinness has been taking steps to turn around its loss making business. In September, the brewer announced it was making a £12m ($15.9m) investment in its Benin City plant to begin manufacturing mainstream spirits that can be offered to consumers at lower price points when compared to imported spirits. Earlier in January 2016, Guinness Nigeria acquired the distribution rights to Diageo’s International Premium Spirits (IPS) like Johnnie Walker, Ciroc and Baileys in Nigeria and also the rights to distribute McDowell’s whisky, a mainstream spirit brand of United Spirits Limited (USL), a Diageo company in India. And this month, the company launched Malta Guinness Herb Lite, a herb-based and low sugar version of its famous malt brand, Malta Guinness. Also this month, it indicated an interest in partnering with the Benue State Government to increase local sourcing of raw materials such as sorghum and cassava maltose extracts. The brewer currently sources 43% of its raw materials locally but wants to increase it to 75% by 2018.

Unfortunately, the results of some of these initiatives won’t be seen in the financials immediately.