Guinness faces tough times, reports 318% fall in Q4 2016 profit

Baker Magunda

Nigeria’s second largest brewer, Guinness Nigeria PLC is having more tough times to meet up with its revenue targets.

The company has just reported that its made a net loss of NGN4.6 billion compared to NGN1.1 billion reported in the same fourth quarter in 2015. This is a -318% fall in its profit year on year.

The move by the company to raise NGN40 billion via rights issue will further reduce the pressure on the brewer. The moves was taken after Diageo, its parent company declined the offer to buy more stake into the business.

Guinness is facing problems caused by a collapse in Nigeria’s macroeconomic and competitive pressures posed Nigerian Breweries, its bigger opponent as well a demographic twist in taste.

Guinness Nigeria Plc posts Gross profit of NGN15.5 billion for the second quarter 2016 in contrast to NGN21.3 billion recorded in the same period 2016 which represents 27% year on year fall.

The company total assets rose to NGN156.6 billion the the financial 2016 compared to NGN 136.9 billion recorded in the fiscal year 2015. Its total liabilities also increased to 120.4 billion compared to NGN95.3 billion posted in financial year 2015.

Marketing expenditure has taken a hit. The fourth quarter saw a dip in spend from NGN4.3 billion in 2015 to NGN2.7 billion in 2016. This is also a trend noticeable with Nigerian Breweries. More resources are now been deployed into distribution and trade promotions for distributors.

In its 2016 third quarter earnings, Guinness has intimated its shareholders that  it will be looking exporting more if its local brands such as Orijin and its Guinness Stout to South Africa. The move is paying off. Revenue from exports has increased to NGN3.7 billion compared to NGN1.8 billion realised in the year before.

Some of the latest measure adopted by Guinness might make it go aggressive in the market against its bigger rival, Nigerian Breweries. The company’s right issue is needed to shore up it balance sheet against ballooning its liabilities.

Company information

Guinness Nigeria, a subsidiary of Diageo Plc of the United Kingdom, was incorporated in 1962 with the building of a brewery in Ikeja, the heart of Lagos. The brewery was the first Guinness operation outside Ireland and Great Britain.

Other breweries have been opened over time – Benin City brewery in 1974 and Ogba brewery in 1982.