The remunerations of Nigerian Breweries Plc directors rose to N684.9 million in 2022, from N612.1 million the corporate governance chiefs collectively received in the previous year. This represents a 12 percent rise in a year the company suffered a profit slump of 27 percent.
From the 2022 financial statements filed with the Nigerian Exchange (NGX), the foremost brewer posted a profit before tax (PBT) of N17.3 billion in 2022 down from N23.7 billion in the preceding period. This inevitably thinned profit after tax (PAT) to the tune of N13.9 billion representing a slim eight percent rise from N12.9 billion in 2021, But the revenue figures evoked smiles.
The 76-year-old multinational recorded a revenue haul of N550.6 billion in 2022, representing a 26 percent jump from the N437.2 billion posted in 2021. Two reasons mainly accounted for this. The firm increased the prices of its products during the year to reflect economic realities. Secondly, the strong brand loyalty continued to earn it exceptional industry patronage.
However, worrisome double-digit inflation was instrumental to the spike in operating costs that gave effect to the lean margins. Inflation had maintained an uptick during the year, reaching 21.3 percent in December from 13.8 percent in January. (It is 21.9 percent in February 2023.) Also, Nigerian Breweries was not immune to the headwinds that attended the Fast-Moving Consumer Goods (FMCG) sector.
The challenges include high cost of raw materials, exchange rate volatility, multiple taxes and effects of rising insecurity which plagued the backward integration window of the FMCG sector.
Nigerian Breweries is among the firms at the forefront of promoting the country’s backward integration policy which emphasises local sourcing of raw materials. The company’s highly reputed support to farmers in the areas of sorghum and cassava plantations has helped in boosting local supply of these commodities. It also effectively supports the small and medium enterprises (SMEs) across the country.
The decision by Nigerian Breweries, a Heineken subsidiary, to use locally grown sorghum in beer production in 1988 led to a catalyst for the creation of an industrial market for sorghum. But the tough operating environment severely impacted the gains of the initiative among the FMCG firms, including Nigerian Breweries.
In a statement signed by the Company Secretary/Legal Director, Nigerian Breweries, Uaboi Agbebaku, the FMCG firm said inflation, devaluation of the naira and high energy prices led to a 33percent increase in Marketing, Distribution, and Administration expenses (which moved from N123.13 billion in 2021 to N163.60 billion in 2022) and a 22 per cent increase in Cost of Sales (from N276.87 billion in 2021 to N337.31 billion).
Agbebaku also noted that the economic challenges experienced during the year under review had greatly affected consumer disposable income, but that the company showed great resilience, guided by its strong premium portfolio, brand mix improvements and strong pricing. (This reflected in the remarkable revenue haul.)
In effect, the brewing behemoth recorded high operating cost during the year. ‘Total Cost of Sales, Selling & Distribution and Administration Expenses’ was N501.86 billion in the inflation-stricken year up by 25.4 percent from N400.41 billion in 2021 as shown by the financial statement.
Transportation expenses, though billed into delivery cost to distributors, increased significantly on the back of high energy prices. It rose to N56.3 billion from N1.8 billion in the preceding year. Raw materials and consumables gulped N246.7 billion in contrast to N197.8 billion in 2021. To sustain its market share, the company did not shirk in its commitment to advert and sales promotions. The cost of this segment of its activities rose by a 40.8 percent to N57 billion from N40.5 billion posted in prior period.
While finance costs dropped to N8.42 billion from N11.06 billion in the previous year, the company sustained huge net loss on foreign exchange to the tune of N26.34 billion as against N7.04 billion in 2021, representing an increase of 274.2 percent. This stemmed from the devaluation of the Naira from N416.4/US1 in January 2022 to N444.18/US$1 in December of the same year on the official forex market.
However, the directors’ remuneration drew analysts’ attention when it hit N702.53 million in 2020, the COVID-19 pandemic year that devastated businesses and created severe health challenges for people. The company posted a revenue of N337 billion with PBT of N18 billion and N7.3 billion in PAT then. The N702.53 million directors’ remuneration in 2020 was a 25.2 percent rise from N561.24 million in 2019. It later climbed to N612.1 million and N684,9 million in 2021 and 2022 respectively.
Analysts say the devaluation of the Naira could have affected the expatriate directors’ remuneration denominated in foreign currencies. “The foreign currency portion of the expatriate directors’ remuneration will be affected by the devaluation of the Naira as witnessed in the volatile forex market that has become an Achilles heel to the economy,” said Ben Akalonu, a finance expert.
The Nigerian Breweries’ Corporate Affairs Director, Sade Morgan had, in a note made available to THEWILL, countered the insinuations that the company’s Directors enjoyed a pay boost noting that the salary emolument of (some of) the company’s Directors, like in other multinationals, were benchmarked in their home country currency.
The statement had further explained that the appreciation in the naira value of the expatriate Directors’ salary was largely due to the devaluation of the naira, “a factor over which we have no control”, adding that this applies to the “top management team members of the board of directors who are expatriates.”
On a strong balance sheet that grew 27.7 percent to N619.88 billion from N485.52 billion in 2021, Nigerian Breweries directors declared a dividend of N13.07 billion amounting to N1.43 kobo per share, to be considered by the shareholders at the next Annual General Meeting (AGM).
A script/bonus issue of one share for four shares was approved at an extraordinary general meeting (EGM) in December 2022 for existing shareholders of the company.
Nigerian Breweries in a disclosure filed with NGX Limited stated that the Securities and Exchange Commission (SEC) has registered the 2,055,226,476 bonus shares approved by shareholders on December 8, 2022. It also stated that the bonus shares are registered on the Exchange.
Earnings per share (EPS) improved marginally from 157 kobo to 158 kobo in 2021 and 2022 financial years respectively. The flock of investors to the Nigerian Breweries stock-yard, positioning for earning season, pushed the share price to N40.84 at the close of trading on Friday March 17, 2023. This is 41.84 percent above the 52 week low of N28.80 set on November 11, 2022.
Sam Diala is a Bloomberg Certified Financial Journalist with over a decade of experience in reporting Business and Economy. He is Business Editor at THEWILL Newspaper, and believes that work, not wishes, creates wealth.
