Boko Haram Attacks Hurt Nigerian Breweries Sales, CEO Says

Nigerian Breweries Plc (NB), the nation’s largest brewer by market value, said bombings and attacks by Boko Haram Islamists are curbing sales in the north.

“People are more reluctant to go out and retail sales in the more insecure areas are under pressure,” Chief Executive Officer Nicolaas Vervelde said in an interview yesterday in Lagos, Nigeria’s commercial capital. The north, which had been growing “in line” with the rest of the market through malt drinks in recent years, “is doing less than what we see elsewhere in the country,” he said.

Authorities in Africa’s biggest oil-producing country blame Boko Haram for a surge in bomb and gun attacks in the country’s mainly Muslim north and Abuja, the capital, in which hundreds have died this year. The group, whose name means “Western education is a sin,” claimed responsibility for attacks that killed 256 people in January in Kano, the biggest city in the north, and last year’s suicide car-bombing of the United Nations building in Abuja that killed 24.

PZ Cussons Plc (PZC), the U.K. maker of soap that gets the greatest share of its sales from Africa, said in a statement in March that its performance would be “some way below expectations” because of turmoil in the north.

Impact On Companies

“In the very short term, there has been an impact,” Nigerian Finance Minister Ngozi Okonjo-Iweala, said in an interview yesterday at the World Economic Forum in Addis Ababa, Ethiopia’s capital. “This is not a phenomenon we see in longer term” and “those companies in the north suffer more from structural issues, like power and so on.”

Former Nigerian President Olusegun Obasanjo said today in an interview in Addis Ababa that he heard in the last 48 hours President Goodluck Jonathan’s government has been pursuing talks with Boko Haram.

Nigerian Breweries, which is a unit of Amsterdam-based Heineken NV (HEIA), has advanced 19 percent this year, twice the 8.6 percent gain for the Nigerian Stock Exchange All-Share Index. (NGSEINDX) First-quarter profit jumped 16 percent from a year earlier, while revenue climbed 29 percent.

The company’s shares were unchanged at 112 naira as of 11:39 a.m. in Lagos.

Even with the violence in the north, the company expects second-quarter earnings to continue to expand at a similar pace to last quarter, Vervelde said, with its Star lager leading sales.

“The fundamentals of the market are still good,” Vervelde said. “If you compare that with what’s happening in Europe, it’s robust growth.”

Growth Forecast

Nigeria’s economy is forecast to grow 6.5 percent this year, according to the National Bureau of Statistics, with the nation’s population of more than 160 million expanding 2.5 percent a year, World Bank estimates show. The European Commission forecasts 0.3 percent growth for the European Union’s economy this year.

Nigerian Breweries last year acquired Sona Systems Associates Business Management Ltd. and Life Breweries Co. to expand its capacity and extend its brands. The company has invested about 100 million euros ($129 million) annually on average over the past five years, a trend that may continue as the company expands capacity at newly acquired breweries, Vervelde said. The company currently operates eight brewing plants in Nigeria.

Nigerian Breweries is “open to any opportunity” to continue expansion through acquisitions, said Vervelde. “The market has become far more competitive.”

’Young Demographics’

SABMiller Plc (SAB), the world’s second-largest brewer by volume, is building a $100 million plant in Onitsha, in south-eastern Nigeria. Guinness Nigeria Plc, a beer-making unit of distiller Diageo Plc (DGE), said last year that it will spend $336 million to expand brewing capacity in the country.

“You’ve got young demographics, fast growing demographics,” said Vervelde. “For beer that’s the prime category, if you take our maltas then basically the whole young population is a very interesting group of consumers.”

Growing incomes and higher oil prices are helping increase consumption of more expensive beverages, Vervelde said. Nigerian Breweries is well positioned to serve this market with its Heineken lager, he said.

“Nigerians are exposed to traveling and international experience and that also means you get in touch with a more cosmopolitan lifestyle,” said Vervelde. “Part of the consumers will probably upgrade to more premium products, spirits is part of it, wine is part of it, but we will also see that in our products in beer and in maltas where people will upgrade.”

To contact the reporter on this story: Chris Kay in Lagos at ckay5@bloomberg.net

To contact the editor responsible for this story: Gavin Serkin at gserkin@bloomberg.net

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