Nigerian Breweries Profit Falls as Weak Naira Raises Costsby
Company's share price has declined 28 percent this year
Naira has fallen to record lows in unofficial trading
Nigerian Breweries Plc, the local unit of Heineken NV, said full-year profit declined 11 percent as the cost of doing business increased amid a weaker naira and slowing economic growth in Africa’s most populous country.
Net income was 38.1 billion naira ($191 million) in 2015, the Lagos-based company said in a statement published on the Nigerian Stock Exchange’s website on Thursday, without providing commentary on the business performance. Revenue rose 10 percent to 293.9 billion naira.
The central bank of Africa’s top crude producer devalued the naira twice before pegging it at 197-199 per dollar in March last year to conserve reserves and stem a rout after it fell to a record 206.32 in February amid plunging oil prices.
The policy, which has been widely criticized by investors and businesses who blame the restrictions for exacerbating the country’s economic slump, pushed the local unit to a record 321.50 per dollar at the black market on Thursday, according to the Lagos-based Association of Bureau de Change Operators of Nigeria. The economy is estimated to have grown at a rate of 3 percent last year, the slowest pace since 1999.
“Devaluation of the naira might have impacted its cost of raw materials,” Efemena Esalomi, a consumer analyst at Vetiva Capital Management Ltd., said by phone from Lagos.
Cost of sales rose 16 percent to 151 billion naira while distribution and other expenses increased 15 percent, Nigeria’s biggest brewer said. The company merged with Consolidated Breweries Plc, another unit of Amsterdam-based Heineken, in 2014 as it aimed to pool resources in the West African nation.
“Increase in revenue is as a result of the merger,” said Esalomi.
Nigerian Breweries shares rose 1 percent to 98 naira at the close in Lagos, valuing the company at 777 billion naira. The shares are down 28 percent this year, compared with competitor and Diageo Plc unit Guinness Nigeria Plc’s 1 percent decline.