Economy

Guinness Nigeria to Maintain Strong Market Position Amid Cost Pressures

Published

5 years ago

09/06/2020

By Dipo Olowookere

One of the leading brewery companies in the country, Guinness Nigeria Plc, has been tipped to maintain its strong market position despite the various challenges it is facing at the moment.

Share price of the company at the Nigerian Stock Exchange (NSE) has plummeted lately and at the close of market on Monday, it was down by 30 kobo to sell at N18 per share.

Last week, a local rating agency, Global Credit Ratings (GCR), assigned national scale issuer ratings of A+(NG) and A1(NG) in the long term and short term respectively to Guinness Nigeria Plc, with the outlook stable.

In a statement obtained by Business Post, GCR said Guinness Nigeria, which controls about 22 percent of the market share in the country, should remain relevant in the space as a result of its “well-diversified portfolio of strong brands spanning lager, stout, spirits and non-alcoholic beverages.”

However, it warned that heightened competitive pressure, coupled with the tough operating environment will continue to affect the organisation.

Guinness Nigeria is a subsidiary of Diageo Plc, a global brewing company with operations in more than 180 countries.

With Nigeria being one of its major markets, Diageo is committed to providing technical, strategic and funding support to the firm, which experienced growth in revenue supported by an increase in sales volume and addition of some new local products to its portfolio.

“Like other industry players, Guinness Nigeria has experienced rising margin pressure, triggered by the depreciation of the Naira, which has impacted the prices of imported raw materials and other locally sourced inputs.

“Cost pressures are expected to worsen in the medium term given the uncertainties in the Nigerian foreign exchange market, coupled with inability to fully pass on additional costs to consumers.

“This notwithstanding, management is confident that earnings margins will stabilise due to the efficiency initiatives, centred on cost rigour and high margin products, rather than volumes,” GCR said.

It said the spike in debt at FY16 and FY17 saw net gearing rise above 80 percent and net debt to EBITDA over 190 percent, from a low of 31.4 percent and 56.4 percent at FY15.

However, gross debt has reduced substantially since FY18, following the conversions of intergroup loans to equity and part settlement of outstanding bank facilities. Thus, net debt to EBITDA moderated to 86.1 percent at end-March 2020 (3Q FY20), while net debt to equity registered below 18 percent, comparing favourably to its major peers,’ the rating firm said, adding that interest coverage has improved to exceed 4x in FY19.

Later in the year, Guinness Nigeria plans to establish a commercial paper issuance programme to refinance its maturing short-term borrowings, as well as diversify sources of funding. Even when gross debt has been fairly elevated, Guinness has reported moderate gearing metrics.

“Guinness evidences a favourable cash conversion cycle that facilitates strong cash generation and liquidity. Nevertheless, the uncertainties in the currency market has forced the company to increase inventory holding to ensure sufficient raw materials are readily available.

“Access to liquidity remains strong with over N16 billion in unutilised bank debt and $23.1 million of intercompany loans available,” the statement said.

GCR noted that it considers the brewing sector to evidence lower cyclicality, the COVID-19 crisis has elevated downside risks for the sector, given its reliance on hospitality and entertainment to drive volumes, saying it “expects Guinness Nigeria to maintain its strong market position due to its entrenched brands.”

“An upward rating movement is contingent on a sustained growth in revenue and firmer margins that translates into more stable profitability and cash flows.

“Conversely, a worse than anticipated disruption to demand from COVID-19 and/or severe weakness in the consumer market, could see earnings fall substantially.

“Furthermore, excessive debt utilisation would see credit protection deteriorate, leading to a rating downgrade,” it said.

Economy

Market Sheds 0.25% as Tantalizers Stocks, Others Shed Weight

Published

16 hours ago

15/03/2025

Dipo Olowookere

By Dipo Olowookere

The Nigerian Exchange (NGX) Limited suffered a 0.25 per cent hair cut on Friday after investors offloaded some stocks, including Tantalizers, which topped the losers’ chart.

The company was the worst-performing equity during the session after it shed 9.85 per cent to settle at N2.93, Jaiz Bank lost 9.72 per cent to trade at N3.25, Neimeth declined by 9.45 per cent to N2.49, Dangote Sugar tumbled by 7.76 per cent to N35.05, and Lasaco Assurance shrank by 5.96 per cent to N2.68.

On the flip side, Royal Exchange gained 10.00 per cent to finish at 88 Kobo, Linkage Assurance soared by 9.57 per cent to N1.26, Guinea Insurance appreciated by 9.52 per cent to 69 Kobo, Enamelware inflated by 9.05 per cent to N25.30, and Red Star Express rose by 8.41 per cent to N5.80.

Business Post reports that the market breadth was negative on the last trading session of the week, with 24 depreciating shares and 22 appreciating share, showing a weak investor sentiment.

Apart from the insurance index, which closed higher by 0.12 per cent, and the commodity space, which closed flat, every other sector crumbled.

The consumer goods counter deflated by 1.08 per cent, the banking industry went down by 0.22 per cent, the energy sector fell by 0.18 per cent, and the industrial goods counter retreated by 0.03 per cent.

At the close of trades, the All-Share Index (ASI) decreased by 265.81 points to 105,955.13 points from 106,220.94 points and the market capitalisation dropped N166 billion to end at N66.352 trillion compared with Thursday’s value of N66.518 trillion.

A total of 750.6 million stocks worth N11.1 billion exchange hands in 10,584 deals during the session versus the 341.7 million stocks valued at N16.7 billion transacted in 11,233 deals a day earlier, implying a rise in the trading volume by 119.67 per cent, and a decline in the trading value and number of deals by 33.54 per cent and 5.78 per cent apiece.

Champion Breweries topped the activity chart with 350.4 million units worth N1.4 billion, Tantalizers sold 53.1 million units for N157.1 million, Custodian Investment traded 51.1 million units valued at N1.0 billion, Lasaco Assurance transacted 36.5 million units worth N97.7 million, and Access Holdings exchanged 30.7 million units valued at N723.0 million.

Economy

Unlisted Securities Bourse Down by 0.60%

Published

17 hours ago

15/03/2025

Adedapo Adesanya

By Adedapo Adesanya

There was a 0.6 per cent decline at NASD Over-the-Counter (OTC) Securities Exchange on Friday, March 14, with the Unlisted Security Index (NSI) dropping 20.44 points to close at 3,363.74 points, in contrast to the previous trading day’s 3,384.18 points and the market capitalisation of the bourse losing N11.81 billion at session to settle at N1.942 trillion compared with the preceding day’s N1.954 trillion.

Yesterday, Okitipupa Plc went down by N30.00 to close at N300.00 per share compared with Thursday’s value of N330.00 per share, Central Securities Clearing System (CSCS) Plc shrank by 31 Kobo to trade at N21.69 per unit versus the previous day’s N22.00 per unit, and Geo Fluids slid by 31 Kobo to trade at N2.84 per share, in contrast the N3.15 per share it was traded a day earlier.

However, FrieslandCampina Wamco Nigeria Plc rose by N2.66 to N38.23 per unit from N35.57 per unit, Afriland Properties Plc expanded by 30 Kobo to N23.20 per share from its previous rate of N22.90 per share, and AG Mortgage Bank Plc increased by 5 Kobo to close at 53 Kobo per unit versus 48 Kobo per unit.

During the session, the volume of securities traded at the bourse fell by 72.6 per cent to 652,237 units from the 3.9 million units recorded on Thursday.

But the value of securities traded went up by 40.5 per cent to N33.1 million from the N23.6 million quoted at the preceding session and the number number of deals increased by 11.7 per cent to 37 deals from 17 deals.

Impresit Bakolori Plc was the most active stock by value (year-to-date) with 533.9 million units sold for N520.9 million, the second position was occupied by FrieslandCampina Wamco Nigeria Plc with 13.0 million units valued at N502.4 million, and the third spot was taken by Afriland Properties Plc with 17.4 million units worth N356.2 million.

The most active stock by volume (year-to-date) was also Impresit Bakolori Plc with 533.9 million units valued at N520.9 million, followed by Industrial and General Insurance (IGI) Plc with 69.9 million units sold for N23.7 million, and Afriland Properties Plc with 17.4 million units valued at N356.2 million.

Economy

Naira Appreciates to N1,522/$1 at Official Market on FX Liquidity Boost

Published

17 hours ago

15/03/2025

Adedapo Adesanya

By Adedapo Adesanya

The Naira recorded its first gain against the United States Dollar in the Nigerian Autonomous Foreign Exchange Market (NAFEM) this week on Friday, March 14, firming up by 1.19 per cent or N18.31 to close at N1,522.37/$1 compared with the preceding day’s N1.540.68/$1.

This was supported by the injection of FX into the market by the Central Bank of Nigeria (CBN).

Over the last few sessions, the local currency had depreciate following recent pressures in the market as interventions have failed to ease pressure welling in the market with the country’s foreign reserves losing over $2 billion in the last month.

However, there were fresh injections at the session, which boosted the value of the local currency in the official market.

Equally, the domestic currency appreciated against the British Pound Sterling at NAFEM yesterday by N25.93 to sell at N1,640.20/£1 versus the previous day’s N1,990.13/£1 and improved its value against the Euro by N22.30 to quote at N1,653.78/€1, in contrast to the preceding session’s value of N1,676.08/€1.

In the parallel market, the value of the Nigerian Naira remained unchanged against the US Dollar during the trading day at N1,590/$1.

As for the cryptocurrency market, sellers of risk assets took a breather yesterday, with crypto markets posting sizable gains after risk appetite returned to markets.

Solana (SOL) jumped by 6.7 per cent to trade at $133.10, Ripple (XRP) gained 4.1 per cent to finish at $2.39, Cardano (ADA) went up by 3.8 per cent to settle at $0.7356, Dogecoin (DOGE) rose by 2.5 per cent to sell at $0.1723, Bitcoin (BTC) grew by 2.3 per cent to end at $83,987.28, Litecoin (LTC) added 3.0 per cent to quote at $91.48, Binance Coin (BNB) appreciated by 1.8 per cent to $590.92, and Ethereum (ETH) improved its value by 1.4 per cent to sell at $1,919.80, while the US Dollar Tether (USDT) and the US Dollar Coin (USDC) remained unchanged at $1.00 each.