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Diageo plc, the world’s biggest distiller, has jettisoned its intentions of raising majority stake in brewer Guinness Nigeria plc, as it maintains positive outlook for the country in the long term amid a slow growing economy.
Diageo had in September 9, 2015, offered through its wholly owned subsidiary Guinness Overseas Limited for up to 15.70 percent of the share capital of Guinness Nigeria.
The London-based company said in the light of the current market conditions in Nigeria, over the past 12 months, it was logical it focused on deploying resources in continuing to support its subsidiary company.
Nigeria remains a key strategic market and Diageo remains supportive of Guinness Nigeria, its board and market and the actions taken by Guinness Nigeria to mitigate the impact of the challenging environment, according to a statement on the website of the Nigerian Stock Exchange.
Nigerian economy is grappling with a sudden drop in the price of oil by 50 percent that forced the central bank to impose capital controls that saw investor flee. A scarcity of dollars made it practically difficult for companies to import raw materials, plant and machinery for the purpose of meeting production demand.
Inflation has risen to 17.60 percent in August, as against 17.10 percent for the month of July, the highest in 11 months. This means that consumers have little money in their pockets to hit the bar.
Read also:https://businessday.ng/companies/article/guinness-nigeria-records-biggest-loss-in-9-years/
The economy contracted 2.1 percent in the second quarter while the International Monetary Fund (IMF) forecasts the GDP would shrink by 1.80 percent, the worst recession since 1991.
“The business environment for the fast-moving consumer goods sector was extremely challenging,” Kolawole Jamodu, its chairman, said in the statement. Operating conditions were tough largely because of the global slump in the price of oil, on which Nigeria’s government depends for about 70 percent of revenue, and a shortage of dollars to pay for imports, he said.
Guinness Nigeria’s audited financial statement for June 30, 2016, showed the brewer posted a loss after tax of N2.01 billion from a profit of N7.79 billion. Sales were down 13.19 percent to N101.97 billion. The company’s share price closed at N98 in the floor of the exchange while market capitalisation stood at N147.56 billion.
