How Guinness Nigeria Toplines Gains Was Affected By Higher Net Finance Costs 

Guinness Nigeria Plc in its unaudited second quarter financial results for 2024 , showed a standalone loss per share of N3.57 against N0.58 in second quarter 2023, translating to a loss per share of N2.39 in half year of 2024 against N1.84 in half year 2023.

The negative outturn in earnings was primarily due to a substantial increase in net finance cost.

In second quarter 2024, GUINNESS achieved a 26.6% increase in revenue, underpinned by (1) higher prices implemented across the brewer’s strategic focus categories, such as Stout, Ready-to-Serve, and Mainstream Spirits, and (2) an improved product mix on premiumization. On a quarter-on-quarter basis, revenue grew markedly by 39.5%, benefiting from festive-induced demand and increased sales from on-trade channels.

Despite the strong topline growth, the gross profit margin contracted by 319bps to 33.5%, undermined by a higher cost of sales stemming from persisting macroeconomic challenges such as inflation, currency depreciation and FX market illiquidity.

Accordingly, the EBITDA margin contracted by 44bps to 13.3% amid higher operating expenses.

Further down, net finance cost maintained its uptrend, surging by 385.8% in second quarter of 2024, mainly driven by a 325.9% surge in finance costs.

The increase in finance costs in the period is attributed to a rise in accrued interest expenses and foreign exchange losses.

Despite the increase in finance costs, the brewer managed to reduce its total borrowings, as the total borrowings decreased slightly by 5.3% YTD to NGN60.35 billion when compared to N63.76 billion in 2023 financial year.

Overall, the brewer reported a pretax loss of N8.25 billion compared to a PBT of N3.19 billion in second quarter of 2023.

Following a tax credit of N420.23 million in the quarter as against tax expense of N1.92 billion in second quarter of 2023, the loss after tax settled at N7.83 billion against profit after tax of N1.28 billion in second quarter of 2023.

While the brewer demonstrated strength in revenue growth in the period, the substantial increase in finance costs, majorly due to FX loss, impacted earnings in the period.

Looking forward, market analyst anticipate sustained revenue growth fueled by premiumization and a favourable price/volume mix.

Nonetheless, they noted that the brewer faces significant FX volatility risk, prompting a decision to halt the importation of Diageo Premium Spirits.