Guinness Nigeria Posts Biggest Loss in 30 Years on High Cost

LAGOS (Capital Markets in Africa) Guinness Nigeria Plc, the country’s second-biggest brewer, posted its biggest loss in at least 30 years as production and financing costs rose in Africa’s most populous nation.

The local unit of London-based Diageo Plc posted a loss of 4.67 billion naira ($14.8 million) for the six months through December compared with a profit of 1.17 billion naira ($4.71 million) a year earlier. Cost of sales rose by more than 50 percent while financing costs near-tripled to 6.11 billion naira, the Lagos-based brewer said in an e-mailed statement on Thursday.

“Similar to most consumer goods names, Guinness continues to suffer from the unfavorable macroeconomic conditions,” analysts at FBN Quest in Lagos, the commercial capital, said in a note to clients. “The foreign-exchange pressures the company faces are being reflected in the gross margin line.”

Guinness Nigeria is among companies struggling with a shortage of foreign currency in Africa’s top crude producer that’s made imports of everything from food to factory inputs more expensive. Dangote Group, owned by Africa’s richest man Aliko Dangote, shut its tomato-processing factory because dollar shortages made it difficult to import equipment, the Lagos-based Punch newspaper reported this month. Guinness Nigeria imports more than 65 percent of its raw materials, FBN Quest estimates.

Inflation, which reached an 11-year high in December, also contributed to higher costs, Finance and Strategy Director Ronald Plumridge said on an analyst call on Thursday. With net sales rising 19 percent to 59.5 billion naira from the previous year, the brewer has sought to mitigate those costs with higher productivity, he said.

The shares fell 5 percent to 66.55 naira as of 11:51 a.m. in Lagos. The company said on Tuesday it plans to convert a portion of dollar-denominated loans from parent Diageo into shares to limit the impact of exchange-rate volatility and conserve cash. A planned 40-billion-naira rights issue, which awaits regulatory approval, could take six to seven months, Plumridge said.