Nigerian Breweries Plc (NB) published its 2023 full year audited financials statements for the period ended December 31, reporting a loss per share of N12.80, a sharp contrast to the earnings per share of N1.58 in 2022 financial year.

The weak performance in the period was driven by the combined impact of (1) weaker gross margin (2) increased FX loss and (3) higher finance costs.

A breakdown of the result shows that revenue increased modestly by 8.9% against 25.9% recorded in 2022, aligning with analysts forecast of 9.0%, driven by higher pricing and better product mix.

However, volume performance in the period weakened, reflecting the pressure on consumer disposable income due to inflation and the impact of naira devaluation and fuel subsidy removal.

Gross profit margin declined by 329bps to 35.5% in 2023 when compared with 38.7% in 2022, due to the faster increase in the cost of sales 14.7% relative to revenue growth of 8.9%.

The higher cost pressures in the period stemmed from the highly inflationary environment and naira devaluation. Consequently, EBIT (-207bps y/y) and EBITDA (-125bps y/y) margins dipped to 7.3% and 15.3%, respectively, in 2023 financial year, further dampened by a 4.4% growth in OPEX.

Following a (1) 482.1% increase in FX losses, attributable to naira devaluation, and (2) higher finance cost , net finance charges increased significantly by 449.7% to N189.19 billion in the period under consideration.

On the higher finance costs, analyst note that the brewer took on additional loan facilities as total borrowings surged by 179.4% to N341.60 billion in 2023 financial year.

Overall, NB recorded a pre-tax loss of N145.22 billion against profit before tax N17.34 billion in 2022.

Following a tax credit of N38.92 billion in the period as against tax expense of N4.15 billion in 2022 financial year, the loss after tax printed N106.31 billion when compared to profit after tax of N13.19 billion.

The brewer was notably affected by the weak purchasing power of consumers due to escalating inflationary pressures and the impact of the naira devaluation.

Looking ahead, market analyst anticipate higher prices to support NB’s revenue, although volume growth may remain subdued due to constrained consumer spending.

Additionally, they note that cost pressures, persistent FX illiquidity issues and elevated finance costs remain significant challenges to profitability.