October 30, 2024/InvestmentOne Report
Revenue Shows Strong Growth Amid Cost Pressures: Guinness Nigeria’s Q1:2025 results show
significant revenue growth of 111.44% year-over-year to NGN 125.89 billion from NGN 59.54 billion, however, this was overshadowed by a more substantial increase in cost of sales, which surged by 169.64% to NGN 111.63 billion from NGN 41.40 billion, resulting in a 21.40% decline in gross profit to NGN 14.26 billion.
Operational Costs Surge: The company experienced significant increases in operational expenses, with marketing and distribution costs rising by 60.01% to NGN 13.30 billion, while administrative expenses more than doubled, increasing by 135.75% to NGN 7.89 billion. Other income declined substantially by 95.14% to NGN 67.80 million from NGN 1.40 billion, contributing to an operating loss of NGN 6.87 billion compared to an operating profit of NGN 7.87 billion in Q1:2024.
Financial Position Under Pressure: Finance costs increased significantly by 151.24% to NGN 11.61 billion, though this was partially offset by a 332.72% increase in finance income to NGN 2.44 billion. Net finance costs increased by 126.01% to NGN 9.17 billion, reflecting the challenging interest rate environment and possible foreign exchange impacts.
Bottom Line Reversal: The combined effect of these factors led to a loss before tax of NGN 16.03 billion, compared to a profit of NGN 3.82 billion in Q1:2024. Despite receiving a tax credit of NGN 3.87 billion compared to a tax expense of NGN 1.22 billion in the previous year, the company recorded a net loss of NGN 12.17 billion, a significant reversal from the NGN 2.60 billion profit in Q1:2024.
Shareholder Returns: The impact on shareholders is reflected in the earnings per share, which turned negative at -5.55 kobo compared to a positive 1.19 kobo in Q1:2024, representing a substantial deterioration in shareholder value during the period. The company’s non-current assets saw a growth of 29.7% year-over-year, reaching NGN 130.02 billion in Q1:2025 from NGN 100.26 billion in Q1:2024, driven largely by the addition of deferred tax assets amounting to NGN 25.24 billion. Meanwhile, current assets declined by 19.4% to NGN 116.00 billion from NGN 144.10 billion, impacted significantly by an 82.8% drop in cash and cash equivalents
to NGN 13.12 billion, signaling a decline in liquidity. Total liabilities rose sharply by 36.5% year-over-year, climbing from NGN 185.34 billion in Q1:2024 to NGN 253.02 billion in Q1:2025. While non-current liabilities fell by 27.2% to NGN 1.33 billion, reflecting stable lease liabilities, the primary increase stemmed from current liabilities, which grew by 37.1%. Notably, trade and other payables surged by 66.0%, and loans and borrowings jumped by 45.7%, indicative of increased reliance on short-term financing. Additionally, the bank overdraft reached NGN 22.29 billion, adding further strain on current liabilities. Shareholders’ equity saw a significant negative shift, moving from a positive balance of NGN 59.02 billion in Q1 2024 to a deficit of NGN -10.00 billion in Q1:2025. This change was driven by a 658.7% reduction in retained earnings, which fell to a deficit of NGN -58.55 billion from NGN 10.48 billion, underscoring the impact of the operating loss and increased finance costs on the company’s equity base.
Outlook: A review of the company’s loans and borrowing profile shows that within the quarter,
Guinness paid off its N39.3 billion loans to Diageo International. However, the company took a new N30 billion letter of credit loan during the quarter. During the period, Diageo completed its sale to Tolaram which went further to consolidate ownership with the appointment of a new finance director. It was also noted for a first time that gross profit will be impacted. This places the organization under further stress to maximize margins. Going forward, we exercise a cautious outlook around the organization as the new company continues to make changes.
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