May 8 (Lagos) - Shareholders of Brewery sector stocks would have hoped for some respite from losses that they suffered throughout 2023 but those hopes were quenched drastically when the earnings for the March quarter came out.
After all, the sector has increased its prices to keep up with the Naira devaluation and the inflation monster currently ravaging the Nigerian economy. While that led to sharp increases in the top line, those gains were lost in finance costs and forex related expenses faced by the sector.
A major reason for these forex related losses is these Companies are owned by their global parents which are massive Companies and for them Nigeria is quickly losing its appeal as a top market because of the huge currency devaluations we are witnessing. So the problems in Nigeria are a small blip for these Companies that operate on global scale.
Arguably the industry leader and brewer of Heinekin beer, Nigerian Breweries Plc (
NB ) reported a near 400% increase in its loss of N 52 billion up from loss of 10.7 billion in the same period of 2023. Its top line sales grew by 84% to N 227 billion for the quarter.
Guiness Nig Plc (
GUINNESS ) was next up and reported top line growth of 44% but finance costs ate into those numbers and brewer reported a quarterly loss of N 56.4 billion.
Last but not the least was International Breweries (
INTBREW ), the maker of Budweiser beer in Nigeria. They outdid others by far and reported the biggest loss in the sector of N 110 billion for the 3 months ended March 31 2024. The Company did grow its top line by 89% to N 103 billion.
Another listed Company albeit a regional player Champion Breweries (
CHAMPION ) also reported loss for the March quarter. What is concerning is that its loss of N 823 million was up 750% from loss of N 96 million in the same quarter of 2023.
The stocks of these brewers have sold off to reflect the business reality and are now arguably at a generational low because of many factors apart from the obvious ones. These Companies will have to loss towards rights issues, debt offerings or even mergers & acquisitions in order to come out of this situation.
Investors should start looking at this space as a possible catalyst for gains in the longer term because eventually these Companies (or some of them) will get it right because they have all the experience around the world in this brewery business. Make sure to identify the strongest among the group because some of these Companies may not survive this downturn and may only be able to continue to do business because of financial help from their parent Companies.
Fundamentally, Nigeria is a big market for brewers and there are always going to be people who want to have alcoholic beverages. From the stock market investor point of view, this could be the time to start looking at some of these stocks that are trading at covid-19 pandemic levels.
reporting for easykobo.com on Wednesday, May 8 2024 from Lagos, Nigeria