Guinness Income Falls Flat Despite Reduced Cost

Guinness Nigeria Plc full-year profit fell despite reduction in input costs, as the brewer grapples with weak sales caused by brand disloyalty and [showads ad=GLO]spiraling interest expense, analysis of the financial shows. For the 12 months through June 2014, the company’s pretax profit fell by 31 percent to N11.68 billion from N 17 billion the same period of the prior year Q4 2013 (end June). [showads ad=GLO]The profit was pressured by an increase in interest expense by 13 percent to N4.44 billion in the review period, compared with N3.92 billion the preceding year. A 59 percent reduction in tax rate helped cushion the hurt at the bottom-line level as net income reduced by 19 percent to N9.57 billion, as against N11.86 billion at Q4 2013 (end June).Despite a reduction cost of sales margin to 52.98 percent in 2014, from 54.20 percent in 2013, the company needs to brace up on the management of direct costs attributable to projects as gross profits were down by 6.91 percent to N51.34 billion. Although, operating expenses were flattish at N35.94 billion, [showads ad=GLO]the company bemoaned the rise in energy costs as most of their factories run on generators and diesels, a more expensive source of energy. Additionally, the insecurity in the North combined with bad roads, also impacts negatively on the firm’s operating performance. Revenues were down 11 percent to N109.20 billion as of Q4 2014 (end June) from N122.40 billion the preceding year, as consumer shifts taste to cheaper brand. Industry analysts say the company has to improve on its premium brand whose patronage has fallen compared with its competitors. [showads ad=GLO] It also has to introduce new innovative market penetrating products, which should be backed by strong marketing and advertising strategies. Net margin, a measure of profitability and efficiency, reduced by 93 basis point to 8.76 percent, while earnings per share EPS dipped to 636k in Q4 2014 from 793k as of Q4 2013.Fixed assets turnover was 0.82x, while total assets were up by 9.13 percent to N132.32 billion in Q4 2014, as against N121.05 billion as of Q4 2013 (end June)Current ratio, which measures the ability of a firm to meet its short-term obligation as at when due increased to 0.62x in 2014 from 0.62x last year, albeit lower than the 2.1x industry average. The company share price closed at N175.80 on the floor of the Nigerian Stock Exchange, while market capitalisation stood at N264.73 billion. [showads ad=GLO]