International Breweries succeeded in defending its market share in a slowly growing breweries market. The company, which lifted its level of profitability to a new high last year, has defended its improved profit performance in its 2013/14 financial year.
The company’s sales revenue attained a new peak after an outstanding growth in the preceding year. After tax profit declined in the year, which can be excused on the irregular accounting period of 15 months for the preceding year.
Otunba Michael Daramola, the company’s managing director/chief executive officer, can boast of having placed his company on a platform to compete favourably with the giants in the brewing business. Sales volume and revenue aren’t growing reasonably in the industry generally but International Breweries is seen to be beating the competition.
The company grew sales revenue by 6.4% to N18.49 billion in 2014 over the 15-month figure in the preceding financial year. This is slightly ahead of the 6.3% improvement recorded by Nigerian Breweries year-on-year in 2013. Guinness Nigeria recorded only a marginal improvement of 2.1% in sales revenue in 2013 while a drop in sales revenue looks likely for the company in its 2013/14 financial year.
International Breweries has achieved a rapid growth in sales revenue in the past five years from about N930 million in 2009 to N17.39 billion in 2013 and further to N18.49 billion in 2014. This indicates a sustained gain in market share over the period and the ability to defend the market share so far.
Two major expenditure elements of the company – cost of sales and marketing/administrative expenses, declined during the financial year but interest expenses claimed much of the revenues saved. Against the increase of 6.4% in sales revenue, cost of sales declined marginally at N9.59 billion. That enabled gross profit to grow well ahead of sales revenue by 15.6% to N8.90 billion during the period. Gross profit margin improved from 44.3% to 48.1% over the review period.
Marketing/administrative expenses also declined by 8.9% to N3.90 billion during the year and therefore represents a reduced share of sales revenue. The decline accounted largely for an expansion of 45.5% in operating profit to N5.01 billion during the year.
Much of the revenues saved in the two expenditure lines that declined were claimed by interest expenses, which soared from only N18 million in the preceding year to more than N1.0 billion in 2014. At the same time, interest income dropped by 86.4% to N42 million. The sudden change from a net interest income of N291 million in 2013 to a net interest cost of N967 million in 2014 is the key factor that caused the profit decline in the year.
Profit margin declined from 13.4% in 2013 to 11.4% in 2014. The full year figure is less than the 14.1% level the company recorded at the end of the third quarter. Net profit growth slowed down considerably in the final quarter. The full year profit figure is only slightly higher than the third quarter figure of N1.92 billion. Nigerian Breweries is ahead with a net profit margin of 16% at the end of 2013 while Guinness finished its 2013 operations with a net profit margin of 11.7%.
The upsurge in interest expenses for International Breweries in 2014 is not explained by the closing figures of the company’s borrowings. Long-term borrowings, which constitute the main balance sheet debts of the company, made only a marginal increase of 1.7% to N3.85 billion. Short-term borrowings dropped by 68.1% to N772 million during the period.
Other changes in the balance during the year include a decline of 8.3% in inventories to N2.24 billion, a decline of 6.3% in trade and other receivables to N2.94 billion and a drop of 62.3% in cash and bank balances to N393 million. Trade and other payables were virtually unchanged at N5.30 billion during the year.
The company earned 64 kobo per share in 2014, which is a decline from 71 kobo in the preceding year. Net assets per share has improved from N2.85 in 2013 to N3.42 in 2014.
Directors have announced a dividend of 32 kobo per share, an improvement from 25 kobo paid in 2013. The company’s register will close between 11th and 15th August while payment is scheduled for 3rd September 2014.
