Wednesday, October 27, 2021



Guinness Nigeria slashes impairment loss, returns to profit

Guinness Nigeria slashes impairment loss, returns to profit
October 10
17:33 2021

Guinness Nigeria Plc has slashed a huge impairment loss of roughly N12 billion that caused a loss of N12.6 billion last year. The impairment loss, which was a write off of idle, damaged and obsolete assets, shrank to N533 million at the end of the company’s 2021 financial year ended June.


The sharp drop in impairment loss enabled the brewing company to return to profit in its just concluded financial year. Guinness closed the 2021 financial year in June with an after tax profit of N1.2 billion.

This is a turnaround from the worst earnings record the brewing company has seen in close to a decade. The loss in 2020 had erased more than two preceding years’ profits put together and shrank retained earnings by 40 percent.

The closing profit for the 2021 financial year is however a drop from the N1.8 billion after tax profit the company posted at the end of its nine months of trading last March. The drawback came chiefly from increased tax expenses in the last quarter.


Tax expenses multiplied from N1 billion at the end of the third quarter to N4.5 billion at full year. The tax expenses consumed 78 percent of pre-tax profit of N5.8 billion at the end of full year operations. This is against a tax credit of N4.5 billion in the preceding financial year.

On the positive side of the company’s earnings story is a major upturn in sales revenue from a 21 percent drop in the preceding financial year. The improvement in sales revenue that Guinness recorded in the interim reports was sustained to full year.

Sales revenue accelerated through the year from less than 6 percent at the end of the second quarter to roughly 20 percent at the end of the third quarter. The biggest increase happened in the final quarter, leading to a marked revenue growth of almost 54 percent at full year.


Guinness Nigeria achieved the strongest growth in sales revenue during the 2021 financial year at an increase of 53.7 percent to close at over N160 billion for the year. This changed a trend of declining turnover to one of outstanding growth in the 2021 financial year.

The company succeeded in realising the big leap in sales revenue that represented the critical factor for it to trim its losses and rebuild profit.

This marks a recovery for the company from a two-year drop in turnover that registered the lowest sales revenue figure since 2017 at the end of the preceding financial year. Guinness had lost as much as 21 percent of sales revenue in the 2020 financial year.

Despite returning to profit, two major challenges continued to face the company’s operations. The first is rising input cost, which grew well ahead of sales revenue at about 62 percent year-on-year to close in the region of N115 billion.


The other is marketing and distribution cost, which grew by about 41 percent to N26 billion over the review period.

However favourable developments on both sides of cost and income enabled the company to achieve reasonable operating stability. Despite the high growth in cost of sales, the company still raised gross profit by 37 percent to about N46 billion at the end of the financial year.

There was also an outstanding increase in other income, which more than doubled at 105 percent to over N1 billion. On the side of cost, administrative expenses went down by close to 27 percent to N10.5 billion.

Also, net impairment losses on financial assets that exceeded N2 billion in the preceding financial year, turned around to a net impairment gain of N229 million over the review period.


The drop in impairment loss on property, plant and equipment covered a lot of ground for the company in terms of cost savings.

The drop enabled the company to build an operating profit of close to N10 billion at full year, a big turnaround from an operating loss of N12.8 billion in the 2020 financial year.

The company’s management took steps to trim finance expenses and a marginal decline in net finance expenses was achieved at the end of the financial year. This was achieved by cutting down borrowings from nearly N23 billion at the end of the prior financial year to N16 billion at the end of the 2021 financial year.

Management’s broad steps in focusing on key categories – to step up growth of spirits and launch innovative ways to court consumer demand appears to be yielding fruits. How to grow sales revenue at low input cost remains the challenge.


















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