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Guinness Nigeria posts first annual loss in four years, shares fall

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Guinness Nigeria slumped to an annual pretax loss of 17.07 billion naira ($45 million), it’s first in four years, hurt by writedowns and coronavirus-induced disruptions, sending its shares almost 9% lower on Friday.

The company, which is 54% owned by UK-based drinks group Diageo, said the COVID-driven lockdown had affected sales in the fourth quarter, closing bars and making it difficult to transport products across the country.

The economic backdrop also made life difficult for Guinness Nigeria, with Africa’s largest economy set to fall into recession in the third quarter after GDP contracted by 6% in the second three months of the year.

Guinness Nigeria’s sales in the 12 months through June fell to 104.37 billion naira, down 21% from the year before.

The company, which had made a pretax profit of 7.10 billion naira last year, faced declining sales, dollar shortages and higher inflation, similar factors to what had in 2016 triggered its first loss in 30 years at a time when Nigeria entered recession.

Guinness Nigeria was also hit by naira devaluation, which contributed to increased financing costs, and a drop in the value of its shares, prompting it to take a writedown based on their market value.

The brewer, which had concentrated on the premium beer and malt segment, shifted focus in 2017 to the cheaper or volume end of the market. Now it is betting on spirits, such as Johnnie Walker whisky and Orijin gin, to revive its fortunes.

“It’s been a tough quarter and we took decisions to refresh the business,” Finance Director Stanley Njoroge told an analyst call.

“It’s going to be tight in Nigeria this year … The financial results have a lot of correction items. We believe we have reduced overcapacities we do not need under our current strategy,” Njoroge said.

But the company cut its debt to 2.5 billion naira from 20.5 billion a year ago.

Shares fell to a two-week low of 14.3 naira, valuing the company at 21.5 billion naira. The stock has fallen 88% from its 2018 peak of 120.25 naira.

 

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