Guinness multiplies profit more than 8 times to N15bn in Q3

A season of galloping recovery and growth is in the making for Guinness Nigeria Plc with profit multiplied more than eight times year-on-year to over N15 billion at the end of its third quarter operations. The brewing company gained further momentum on the earnings track in the third quarter with profit for the quarter tripling quarter-on-quarter to N6.5 billion.

The company’s interim report for the nine months of operations ended March 2022 shows a continuing build-up of quarterly profits from N4 billion in the first quarter to N4.8 billion in the second and further to N6.5 billion in the third.

The third quarter contributed 42.5 per cent of the company’s nine-month profit figure, jerking it up from the half year reading of N8.8 billion to N15.3 billion at the third quarter close.

The closing profit for the period is 8.3 times the company’s after tax profit of N1.8 billion in the same period in 2021 and roughly 13 times its full year closing profit of N1.2 billion in 2021.

With the third quarter profit, Guinness has more than countered the N12 billion loss it incurred in 2020, leveling up also the consequent 40 per cent erosion of retained earnings. Further gain in traction in the third quarter has set the company comfortably on the way to set the highest profit record in many years in 2022.

The company’s cruising speed growth in profit continues to be powered by an equally high speed growth in revenue. Quarterly sales revenue numbers have maintained strong improvements quarter-on-quarter with the third quarter rising by 18 per cent to over N50 billion.

The sales figure for the third quarter is however lower than the N61.7 billion in the second quarter but better than the 47.5 billion sales in the first quarter. The numbers add up to a nine-month turnover of N159.4 billion for Guinness Nigeria at the end of March 2022. This is already almost at par with the N160 billion sales revenue for the 2021 full year.

The sales figure at the end of the third quarter represents a year-on-year growth of 38.7 per cent, which is a slowdown from 51 per cent growth in sales revenue at half year. It is nevertheless a strong growth for the second year after a 54 percent advance in turnover in the preceding financial year.

The upswing in profit performance follows a change in trend from two preceding years of declining turnover to 2020 to outstanding growth in sales for the second year in the 2022 financial year.

Growing sales was reinforced by moderating cost of sales but marketing and distribution expenses continued growing well ahead of sales.

Cost of sales grew by only 3 per cent quarter-on-quarter to N29.6 billion for the third quarter compared to 18 per cent growth in sales revenue over the period. This is the slowest quarterly increase in cost of sales so far in the year, representing a sharp drop from increases of 40 per cent in the first quarter and 31 per cent in the second.

It, therefore, continues to moderate relative to sales with a sustaining decline in its claim on the revenue at 68 per cent in the first quarter, 65.5 per cent in the second and less than 59 per cent in the third.

Guinness’ year-on-year reading reflects the further moderation in input cost achieved in the third quarter. At N102 billion at the end of the third quarter, cost of sales slowed down from 35 per cent growth year-on-year at half year to less than 24 per cent. This compares to the 38.7 per cent growth in sales revenue.

The company achieved a reduction in the proportion of sales devoted to meeting input cost, which went down from about 72 per cent in the same period last year to 64 per cent at the end of the third quarter. The slowdown lifted gross profit by over 76 per cent to N57 billion at the end of the third quarter.

However, marketing and distribution cost continues to grow well ahead of sales albeit a slowdown within the third quarter. At N28 billion at the end of the third quarter, marketing and distribution expenses grew by 52 per cent year-on-year compared to the 38.7 per cent growth in turnover. This is a slowdown however from 76 per cent increase at half year.

This means marketing and distributing cost for generating the naira of sales revenue increased from 16 kobo in the same period in the last financial year to less than 18 kobo but only slightly increased from over 17 kobo at half year.

An outstanding growth of 97 per cent in other income at half year was punctured by an occurrence of other loss of N31.5 million in the third quarter, which slowed down the year-on-year growth to 41 per cent to N1.3 billion at the end of the third quarter.

Administrative expenses remained under control at a moderated increase of less than 4 per cent to N7.6 billion at the end of the third quarter. This is a slowdown from 12 per cent growth at the end of half year operations. The cost saving here helped to boost operating profit, which multiplied three times from N7.6 billion in the same period last year to N23 billion at the end of the third quarter.

The company’s management improved yet further a good combination of high growth in finance income and a sharp drop in finance cost seen at half year. Net finance cost fell by almost 87 per cent to N417 million at the end of the third quarter.

Adding cost savings to advancing revenue sums up the earnings story of Guinness Nigeria so far in its 2022 financial year that promises a rosy ending next June.