Nigerian Breweries Plc has revealed a significant foreign exchange loss of N153 billion attributed to the devaluation of the naira, as stated in its earnings report accompanying its audited results for the year ended December 2023, filed with the Nigerian Exchange Limited.
In its interim report for the first half of 2023, covering the period ended June 30th, Nigerian Breweries Plc had already reported an exchange rate loss of N70.6 billion for the second quarter, indicating ongoing challenges related to currency devaluation.
Despite achieving revenue growth of 8.9% to N599.64 billion from N550.64 billion, the company faced notable financial hurdles.
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Its net finance expense surged by a significant 449.7% to N189.19 billion. Consequently, Nigerian Breweries Plc incurred a loss of N106.31 billion, a stark contrast to the N13.19 billion gain recorded at the close of 2022.
The earnings report underscores the susceptibility of Nigerian companies to currency fluctuations and broader macroeconomic factors.
It emphasizes the imperative for effective risk management strategies to mitigate the adverse effects of currency devaluation on financial performance.
In comments accompanying the financial results, the Nigerian Breweries Board of Directors said,
“The Nigeria business landscape experienced significant shifts in 2023 with substantial impact on businesses and livelihoods nationwide. The redesign of the naira notes which resulted in cash shortage that severely hampered social and economic activities nationwide set the tone for a turbulent year.
“High double-digit inflation rates (with food inflation at more than 30%), removal of subsidy on premium motor spirit (fuel), devaluation of the naira, and foreign exchange scarcity further exacerbated the already difficult environment for the populace and businesses.
“Notwithstanding, the Company was able to grow its revenue by 9 per cent compared to the previous year aided by a positive price mix. However, the operating profit fell by 15 per cent due to higher input cost and one-off reorganisation costs despite strong and aggressive cost savings and other efficiency measures.
Coupled with the impact of the devaluation of the naira which resulted in a foreign exchange loss of N153bn, the Company recorded a net loss of N106 billion during the year.”
The board of Nigerian Breweries Plc went on to state its preparedness to tap into its decades of experience of operating in Nigeria to weather the current macroeconomic headwinds.
“In a difficult operating environment, the Board will ensure that the Company builds on its more than 77 years of experience of operating in Nigeria to cope with current realities. The Company will continue to be resilient and forward-thinking leveraging our broad portfolio, strong supply chain footprint, and passionate workforce to drive long-term value creation for its shareholders and other stakeholders,” the board said.
In August, NB reviewed the prices of its products upward to accommodate the continued increase in the cost of inputs.
A leaked memo to its customers has shown that the company is planning another price hike effective Monday. However, it was not indicated which of its products would be affected.
Nigerian Breweries produces alcoholic products like Star Lager, Gulder, Legend Extra Stout, Heineken, Goldberg, Life, and Star Radler.
The Central Bank of Nigeria harmonised the segments of the foreign currency market in June 2023 leading to a devaluation of the Naira.
The effect was felt by different companies that recorded forex losses. However, the banking sector faired better as they enjoyed FX revaluation gains.