- Bears sustain dominance as index depreciates by 0.18%, investors lose N66.59bn
BY FESTUS OKOROMADU, ABUJA
Nigerian Breweries Plc has once again reported a quarterly loss in its Q3 unaudited condensed interim financial statements for the quarter ending on September 30, 2023.
The company attributed the loss to a combination of factors, including foreign exchange losses due to the devaluation of the Naira, elevated interest rates, reduced sales volume stemming from decreased disposable income, and increased input costs due to inflation.
The Group’s disclosure indicated a loss before tax of ₦10.319 billion, marking a significant increase of 56.24% compared to the loss of ₦6.604 billion reported in the corresponding period in September 2022.
This substantial loss has, in turn, pushed the nine-month loss before tax to N78.163 billion, contrasting starkly with the N19.093 billion pre-tax profits recorded during the same period last year
On the results, the company achieved single-digit revenue growth, primarily driven by pricing aimed at offsetting the impact of inflation.
Sales volumes declined, although flavored beer volume increased led by Desperados. The drop in volumes was attributed to the pressure on disposable income and socio-political challenges across the country.
In Q3, revenue showed a year-on-year increase of 4.20%, reaching N124.382 billion, and bringing the nine-month revenue to N401.801 billion
However, the persistent impact of rising inflation took a toll on the company’s cost structure, leading to an operating loss of N1.119 billion in Q3.
This, in turn, contributed to an overall 22% decline in operating profit, moderating the nine-month operating profit to N27.259 billion.
In addition to this, the company faced significant growth in net finance costs, primarily driven by high-interest expenses and foreign exchange losses.
Consequently, the quarterly loss after tax increased by 141% year-on-year, reaching N9.596 billion, which in turn led to a nine-month post-tax loss of N57.195 billion.
The company experienced a substantial 257.59% increase in interest income, reaching N107 million in Q3, resulting in a nine-month total of N293 million.
However, this growth in interest income was offset by significant interest expenses of N7.740 billion and a net loss of N1.567 billion on foreign exchange transactions.
This combination resulted in a net finance cost of N9.200 billion in Q3, with the nine-month net finance cost reaching N105.425 billion. This reflects a significant 546.98% year-on-year growth in net finance costs.
The continuous loss in earnings is expected to have a consequential impact on several fronts.
Firstly, it would likely affect the return to shareholders, as there may be limited or no profits available for distribution as dividends. This can disappoint investors who rely on dividend income.
The company has a good dividend payment record. In 2022, it distributed its entire earnings as dividends, amounting to N13.9 billion.
However, the continuous decline in retained earnings, largely attributed to after-tax losses, is a cause for concern regarding the company’s ability to pay dividends this year.
As of September 2023, retained earnings have dwindled to N22.995 billion from N90.774 billion in the corresponding period of the previous year.
It is important to note that, unlike the previous year, the company has not yet announced an interim dividend, further emphasizing the uncertainty surrounding dividend payouts.
Furthermore, the persistent trend of declining earnings can have a direct impact on the overall valuation of the company, a matter of concern for both existing shareholders and potential investors.
Consequently, as investors witness this trend, they may grow less confident in the company’s ability to reverse its financial performance. This loss of confidence can, in turn, trigger a decrease in the company’s stock price and a waning enthusiasm in the market
In 2022, the company’s share price experienced a notable decline, losing approximately 18% of its value. Furthermore, just yesterday, it dropped by 2.6%, closing at N38 per share, contributing to a year-to-date loss of 7.2%.
These figures indicate a continued downward trend in the company’s share price, which may be a cause for concern for investors and market observers.
Overall, it is of utmost importance for Nigerian Breweries to actively seek ways to diversify these systematic risks and proactively address these macroeconomic challenges.
Bears sustain dominance as index depreciates by 0.18%, investors lose N66.59bn
Meanwhile, trading on the floor of the local bourse sustained the bearish sentiment recorded during the previous session on Thursday as investors reacted to the Supreme Court’s judgment regarding the 2023 general elections’ litigation.
Thus, the benchmark index, the NGX All-Share Index took a hit, dropping by 0.18 percent, equivalent to 121.21 index points, and settling at 67,084.95 points.
This decline was accompanied by low trading volumes and a negative market breadth.
The total market capitalization of listed equities also dipped by 0.18 percent to N36.86 trillion, with investors shedding N66.59 billion from their portfolios.
The subdued performance resulted in the NGX reporting fewer gainers (12) compared to losers (29) while the year-to-date return of the index stayed at 30.89 percent. Notable stocks like NSLTECH, CWG, THOMAS WY, INTBREW, and UNIVINSURE, 10.00 percent, 9.94 percent, 9.84 percent, 9.78 percent, and 8.33 percent witnessed declines respectively due to selling pressure.
Across various sectors, negative sentiment prevailed, with two out of five tracked sectors closing in the red, two remaining muted, and only one sector experiencing gains.
The Banking and Insurance indexes suffered the most significant setbacks, declining by 0.33 percent and 1.82 percent, respectively, driven by sell-offs in STANBIC, PRESTIGE, CORNERST, GTCO, and ZENITHBANK. In contrast, the Consumer Goods sector managed a 0.12 percent gain, thanks to NESTLE and TRANSCORP.
But the Industrial Goods and Oil & Gas indexes exhibited lull performances. Trading activity on the NGX was bearish, with noticeable declines in the total number of deals and traded volume, down by 13.22 percent and 18.81 percent, respectively, resulting in 5,205 trades and 267.65 million shares.
Nevertheless, the traded value surged by 15.88 percent to N5.11 billion.
FIDELITYBK was the most traded security in terms of volume with 39.83 million units worth N326.85 billion traded during Thursday’s session.
