Nigeria Breweries incur N70.6 billion in forex losses

MaTaZ ArIsInG
Texas

Nigeria Breweries Plc reported an exchange rate loss of N70.6 billion for the second quarter of the year ended June 30th, 2023.

This is according to the information contained in its just published interim report for the first half of the year.

Key highlights 2023 Q2

• Net revenue N154 billion +13% YoY
• Gross Profit N68.4 billion +21.5% YoY
• Operating profit N26.6 billion +119.7% YoY
• Net Finance Cost N77 billion +970.8%
• Pre-tax lossN50.2 billion
• Gross margins 44.4% versus 41.3% YoY
• Operating profit margins 17.3% versus 8.9% YoY
• Working capital -N318.6 billion
• Retained earnings N35.5 billion versus N80 billion (2023 Q1)
• Loss Per Share N4.6

Insights: The losses were a result of the unification of the exchange rate which has led to forex losses upon the revaluation of its dollar-denominated loans.

• The company reported a net loss on foreign exchange of N70.6 billion taking the year-to-date exchange rate loss to N85.2 billion.
• The losses contributed to a massive N47.7 billion reduction in net assets.
• Important to add that the losses did not impact cash as the company still has a healthy cash balance of N34.9 billion.
• However, its negative working capital suggests it has to find money to repay its loans when they fall due within a year. It could also restructure the loans.
• The current losses are likely to impact full-year profits considering that NB also reported a profit after tax of N13.1 billion last year (2022).
• NB has so far reported back-to-back losses in the first two quarters of the year after reporting a loss before tax of N17.4 billion

MAJOR PROBLEM LOOMING ????

GUINNESS INCURRED OVER N49BN ON EXCHANGE RATE LOSSES.

NIGERIA BREWERIES INCURRED FX LOSSES OF N70.9BILLION

Most banks have billions of dollars Eurobond debts on their books..

As at today, there are over $25billion/N22.7trillion, outstanding LC obligations, sitting in the books of the deposit money banks, on transactions by manufacturers, importers of raw materials , plants , equipment, machineries etc , that were consummated over the last 3years…

A manufacturer, who imported raw materials worth $5m to produce and sell goods in Nigeria, at N430/$1 in 2021, [ and whose naira has been deposited at his deposit money banks], will have to cough out additional N2.2bn to secure enough funds to buy dollar at the I and E window to wind down on his obligations to his creditors

Many companies will soon close shops , many will be laid off into the unemployment market and many banks will have to move more toxic assets to AMCON…this is avoidable tragedy, if this man , had put in place the right team with passionately creative minds to help him ….

I expected the current Government to have carried out painstakingly computation of the overall implications/cost of the fx market rates merger , and the proactive steps that they would have taken to draw the line on May 31, 2023….

What they would have done was to ask the banks and CBN to forward all LC obligations in their books as at May 31, 2023 and create a clear pathway and timetable on now to clear it without endangering businesses and their employees..

Having stumbled and started wobbly, one would have expected him to put up a strong team of technocrats to help him remedy the rot

I feel so sorry and sad for Nigeria and Nigerians …Nigerians are in for a long haul…..

MaTaZ ArIsInG

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