International Breweries: Coming Out of the Woods

Kayode Tokede 

International Breweries Plc in its first quarter ended March 31, 2022 reported stronger growth in revenue backed by consumer demand for its brands to migrate into impressive earnings and positioned to delivered enhanced profits in 2022 financial year. 

The volumes growth was ahead of industry expectations that drive revenue by 48 per cent in the first quarter of 2022 and contributed to the company’s migration from loss to positive results in the period under review.

The company operated in a competitive market, coupled with macro-economic headwinds triggered by inflationary pressures, high operating costs and consumer’s low purchasing power.

The unaudited first quarter, 2022 financial result and accounts of International Breweries showed N57.52 billion revenue from N38.96 billion reported in Q1 2021. 

The company growth in revenue was driven by the launch of Can SKU’s Trophy Extra Special Stout in first quarter of 2022. The management also pushed the frontiers of Smart Drinking in Nigeria through its Responsible Beverage Service (RBS) initiative.

Other strategy adopted by the management to drive revenue include improving the quality of its brands from staples that keeps winning with consumers, Budweiser, Hero Lager, Trophy lager and stout. 

Cost of sales rose by 16 per cent to N37.57 billion in Q1 2022 from N32.48 billion in 2021 first quarter, to positioned gross profit at N19.95 billion, representing an increase of 207.68 per cent from N6.89 billion reported in 2021.

The 2022 first quarter result and accounts showed 32 per cent increase in total operating expenses to N12.14 billion from N9.2 billion in Q1 2021, driven by 35 per cent administrative, marketing and promotion expenses that moved from N8.98 billion in the first quarter of 2021 to N12.11 billion in 2022 first quarter. 

Other operating expenses closed first quarter of 2022 at N4.1 billion from N167.7 million in first quarter of 2021. 

Finance Income Growth

Finance income grew significantly to N1.51 billion from N7 million in Q1 2021 as Finance cost grew significantly by 389.4 per cent to N3.35 billion in Q1 2022 from N684.39 million in first quarter of 2021. 

From the profit & loss figures, International Breweries reported net finance costs of N1.84 billion in the first quarter of 2022 from N684.37 million in 2021 first quarter.  

The growth in revenue and finance income contributed to N1.86 billion profit before tax in the first quarter of 2022 as against a loss before tax of N3.56 billion in 2021 first quarter. 

The brewing, packaging and marketing of alcoholic and non-alcoholic beverages company paid a tax of N1.14 billion in the first quarter of 2022 as against tax credit of N982.9 million in 2021 first quarter, to declare N721.17 million profit after tax in 2022 first quarter from N2.58billion reported in the first quarter of 2021.

With this, earning per share gained correspondingly to migrate from N0.10 in 2021 first quarter to N0.05 in the first quarter of 2022.

Underlying ratios also showed that the outward growth was driven by intrinsic improvement in the core operations of the company. Operating profit margin improved from-7.4 per cent in the first quarter of 2021 to 6.4 per cent in 2022 first quarter. 

Pre-tax profit margin also increased from -9.1 per cent in 2021 first quarter to 3.23 per cent in the first quarter of 2022.     

 Economy Headwinds Reflect on 2021 FY

The company 2021 was faced with economy challenges most companies operating in Nigeria as operating expenses increased due to unstable foreign exchange and hike in inflation rate.

International Breweries, thus, in 2021 financial year ended December 31, 2021 maintained growth in revenue with assertive pricing and consistent commercial strategy.

For the financial year ended December 31, 2021, International Breweries reported 33.3 per cent increase in revenue to N182.3 billion from N136.79 billion reported in 2020.

Analysis of revenue by location revealed that local sales of International Breweriesproducts grew by 33.4 per cent to N182.25 billion in 2021 from N136.6 billion in 2020, while export sales dropped by 77 per cent to N46.28million in 2021 from N203.02 million in 2020

A four-year, periodic analysis between 2017 and 2021 showed a steady growth trajectory with consistent year-on-year growth in revenue. One of the major factors contributing to losses by International breweries is operational costs.

Cost of sales rose by 28 per cent to N135.99 billion in 2021 from N106.32billion in 2020, driven by N108.28 billion materials consumed and allocated overheads reported in 2021 from N79.9 billion in 2020.

Total operating expenses rose by 32 per cent to N53.6 billion in 2021 from N40.57 billion in 2020, attributable to 29 per cent increase in administrative expenses.

The breakdown of operating expenses revealed that administrative expenses closed 2021 at N35.9 billion in 2021 from N27.92 billion in 2020, while Marketing, promotion and distribution expenses rose by nearly 40 per cent to N17.67 billion in 2021 from N12.66 billion in 2020.

Amid growing operational cost, International Breweries reported 33 per cent drop in operating loss in 2021 to N18.04 billion from N26.9 billion in 2020. 

Meanwhile, the company reported finance income of N3.01billion in 2021 from N1.5 billion in 2020, while finance cost rose by 51 per cent to N4.8 billion in 2021 from N3.18 billion in 2020.

This positioned net finance cost to N1.79billion in 2021, representing an increase of seven per cent to N1.68 billion in 2020. 

The bottom-line performance showed a loss before tax of N19.84 billion in 2021 from N28.59 billion in 2020. As income tax credit dropped by N2.18 billion in 2021, a decline of 82.6 per cent from N12.51 billion in 2020, International Breweries closed 2021 with N17.7 billion loss in 2021 from N16.08 billion reported in 2020. 

Balance Sheet In Stronger Position

International Breweries reported 26 per cent increase in total assets to N469.95 billion in 2021 from N372.65 billion in 2020. 

Non-current assets grew by 0.52 per cent to N281.443 billion in 2021 from N279.96 billion in 2020, while current assets 103.4 per cent to N188.53 billion in 2021 from N92.7 billion in 2020.

For liabilities, the company’s total liabilities grew by 51.5 per cent to N334.65 billion in 2021 from N220.9 billion in 2020.

As Non-current liabilities rose by nearly 200 per cent to N8.97 billion in 2021 from N2.99 billion, current liabilities gained 49.45 per cent to N325.7 billion in 2021 from N217.9billion in 2020.

In addition to balance sheet position, total equity dropped by 11 per cent to N135.3 billion in 2021 from N151.7 billion reported in 2020. 

The company’s current borrowing rose by 59 per cent to N175.41 billion in 2021 from N110.7 billion in 2020. 

 The proportion of total equity/ total assets dropped to 28.8 per cent in 2021 from 40.72 per cent in 2020. 

Growing Ahead of Industry

The Managing Director, International Breweries, Mr. Hugo Dias Rocha in a comment on the company’s Q1 2022 performance said:  “Based on a consistent commercial strategy, we are growing ahead of our industry. We have continued our journey to profitability, which translates in strong results. We remain committed to create value to our stakeholders consistently.

“Building on top of the momentum of a strong FY 2021, our business started 2022 on a positive note. On the back of firm consumer demand for our brands; a robust revenue management; and volumes growth ahead of industry our revenue grew by nearly 50per cent in 1Q22. We saw consistent growth across all our portfolio.

“Keeping focus on profitability, we have enabled our High-End Company brands to grow healthy in the market. Our global brand, Budweiser and our newest innovation, Trophy Extra Special Stout are on a growth path as part of the High-End growth of above 40per cent.

“In terms of profitability, our Gross Profits grew by 307per cent while Gross Margins expanded by +1800bps. In absolute terms, we are proud to highlight that we returned to profitability in 1Q 2022 as we delivered a positive operating profit of N7.8 billion (excluding net FX losses) and Profit Before Taxes of N1.9 billion amidst cost headwinds.” 

He added, “Through this profitability, we plan on the further strengthening of our brands through powerful campaigns and commercial actions to grow in market. In the reporting period, we are proud of the recognition given by LinkedIn as one of the top best places to work in Nigeria.

“Our recognition as the No 1 best place to work in the FMCG category and 5th on the list across various industries is a testament to our commitment to recruit and retain talents who continue to thrive in an enabling environment as they continue to contribute to the sustainability of our business.”

“International Breweries is a proud part of the world’s largest brewer, Anheuser-Busch InBev, (ABInBev), the world’s largest brewer with over 400 beer brands. In Nigeria, International Breweries is the proud producer of Trophy Lager, Trophy Extra Special Stout, Hero and Budweiser and other popular beer brands, while having a non-alcoholic malt beverages portfolio that includes Beta Malt & Grand Malt, “the Managing Director said.