International Breweries Plc has seen its revenue and profit growth in 2017 tarnished by net exchange losses on financing, which crushed its total comprehensive for the year by 61 per cent to N1.03 billion compared to 2016.
“The loss is majorly from FX-related losses on financing and general finance cost from interest on bank loans as well as a slight uptick in operating expenses (opex),” said Ibinabo Princewill, head of research and strategy at Lagos-based investment firm, Planet Capital Limited.
The company had taken overdraft facilities from various banks at rates that were at least 3 percentage points higher than the previous year. Interest on the bank overdrafts is payable at rates ranging from 19.5% to 20%; (2016:15% to 16.5%), said the company’s annual reports and financial statement which was made available to The Nigerian Stock Exchange (NSE) on Friday last week.
The company had also obtained $62 million credit line from a syndicate of lenders led by Stanbic IBTC Bank; the company has drawn $25.2 million as at the end of the year.
“The balance as at the yearend was $25.266 million. The facility accrued interest at a margin of 1.9% plus LIBOR,” the company’s 2017 financial statement said. “The loan is repayable had been extended by mutual agreement to 5 February 2018.”
International Breweries’ leverage, defined as the total debt as a percentage of the total equity spiked 25 percentage points to 86 per cent within the year as the return on total equity plunged to 7 per cent, from 19 per cent the previous year.
Unrealised net exchange losses surged 200 times to N3.85 billion within the year from just 19.21 million in 2016. This caused profit before tax to drop by 20.92 per cent from N3.66 billion the previous year despite a surge in sales.
The Nigerian brewer’s revenue jumped 40.58 per cent to 32.71 billion in 2017, reflecting the boost injected to the marketing promotional activities of the company within the year. The brewer had increased its advertising and promotion budget by 41.52 per cent, from 3.59 billion in 2016 to N5.09 billion.
The company grew gross profit by 41.60 per cent to N15.16 billion during the year. Gross margin was flat at 46 per cent
The company had informed the NSE on June 6 2017 that it would be merging with sister companies, Interfact Beverages Limited and Pabod Breweries Limited, to enhance operational efficiencies, streamline operations, and manage resources better.
The three brewers are owned by Missouri-based brewing giants, Anheuser Busch.
Innocent Unah
