By Nse Anthony-Uko
(Sundiata Post) – Guinness Nigeria Plc has recorded a profit after tax (PAT) of N2.13 billion for its half year results for the period ended December 31, 2017. The company’s result, which was released to the Nigerian Stock Exchange (NSE) showed net profit of N2.13 billion as against a net loss of N4.67 billion in the corresponding period of 2016.
Capital market analysts noted that this was driven by continued revenue growth, better margin, and lower operating capital (opex) and finance charges. The company also delivered revenue of N70.6 billion and gross profit of N24 billion, representing an increase of 19 per cent and 31 per cent respectively over the same period last year.
The results showed topline growth driven by expansion of the company’s portfolio, and improved operating margins with benefits from productivity initiatives despite sustained cost pressures.
The results also saw marketing spend increase by 17 per cent demonstrating sustained investment behind Guinness Nigeria’s brands. Administrative expenses declined to N4.74 billion from N6.06 billion, driven by the company’s continuing focus on productivity.
Managing director/CEO, Guinness Nigeria, Peter Ndegwa said “in a difficult operating environment, notwithstanding recent signs of economic recovery, we delivered a strong performance with net sales growth of 19 per cent for the half year with growth in spirits and benefits of an expanding portfolio and also against the backdrop of lapping inventory reduction from prior year.”
He added “we believe in the continued execution of our strategy, allowing us to navigate a tough environment characterised by down trading of consumers as disposable income is subjected to additional pressure. We have made significant progress in driving productivity especially in the supply chain and the commercial function, even though cost pressures and inflation takes its toll.”
Ndegwa added “in this half we have also continued to innovate with increased marketing spend across our portfolio to drive the growth on our core brands and to fund our expanding portfolio and innovation pipeline.”
On the successful completion of the rights issue exercise where Guinness Nigeria received approval from its shareholders to raise N40 billion from existing shareholders, Ndegwa said, “the utilisation of the rights issue proceeds leading to significant reduction of the Diageo loan and other borrowings, has resulted into a 32 per cent reduction in the net finance charges and improved our debt to equity ratio from 82 per cent to two per cent.”
Analysts from Cordros Capital Limited said that “continued growth in revenue and the savings on both operating and financing costs bode well for Guinness’ earnings in 2018. However, continued weakening margins dampens earnings growth expectation from 2019, as the effect of low revenue and finance cost bases tapers. The stock has gained 20 per cent year-to-date, and positive reaction to the result is expected.”