International Breweries Plc.’s Loss Increases by 175% over FX Distress
International Breweries Plc’s loss widened by 175% in 2023 as the company’s foreign currency liabilities on its balance sheet resulted in huge losses due to a rapid depreciation of Nigerian naira.
The brewer challenger lost N2.21 per share as a result of a weak performance scorecard as against 81 kobo loss per share registered in the comparable year in 2022 – resulting from the combined impact of 234.2% surge in FX loss and a 591% jump in net finance costs.
According to the company’s unaudited financial statement for 2023, annual loss expanded to about N59.5 billion, a steep increase from N21.63 billion posted in 2022.
The push came from a more than 176% year-on-year increase in the company’s finance costs. The strength of its finance income growth failed to upturn net finance income as a loss sustained from FX revaluation darkened performance.
With about 21% year-on-year growth apiece, the figures showed that both revenue and costs of sales moved in a similar direction amidst rivalry in the breweries sector. International breweries annual revenue surged by about 21% to N264 billion.
Also, the costs of sales climbed 21% to N211 billion at the same time. This left International Breweries’ gross margin unchanged at 20%, clouded by escalating overhead costs amidst rising headline inflation in Nigeria.
Its Q4-2023 standalone result showed a higher loss per share of N1.26 versus a loss per share of N0.84 in Q4-2022. In the last quarter of 2023, International breweries’ revenue expanded by 38.3% with the notable increase attributed to price hikes.
Trophy’s market leadership in the Lager segment contributed to the robust revenue growth, according to analysts. On a quarterly comparison basis, revenue increased by 19.0%, benefitting from higher prices and festive-induced consumption.
The elevated costs are primarily due to higher energy prices, FX illiquidity constraints, commodity cost headwinds, and inflationary pressures. For context, analysts said the company recorded a 24.1% year-on-year increase in raw materials consumed and allocated overheads.
The brewer’s operating loss settled at N35.84 billion in Q4-2023 as against an operating loss of N22.99 billion in Q4-2022, driven by a substantial 234.2% increase in FX loss. Its exposure turned red as dx losses hit N33.60 billion from N10.05 billion in the fourth quarter of 2022.
Net finance costs increased significantly, following higher finance costs, up by 176% arising from interest on borrowings and a decline in investment income.
The increase in interest expenses is attributed to the brewer’s heightened reliance on loans and borrowings during the period, notably, with loans and borrowings surging to N376.09 billion in 2023 from N194.08 billion in 2022.
Details from its scorecard revealed that pre-tax loss increased to N44.14 billion in Q4-2023 versus pre-tax loss of N24.19 billion in Q4-2022. Consequently, the loss after tax settled at N33.80 billion following a tax credit of N10.34 billion.
Despite the impressive top line growth, the brewer’s performance in the period was significantly impacted by high finance costs and FX illiquidity.
Analysts at Cordros Capital Limited anticipate sustained revenue growth from modest price increases, but the brewer still faces a grim profitability outlook driven by ongoing challenges with high financial leverage.
