Any investor who sees the robust turnover growth of Ilesa, Osun State Nigeria-based International Breweries Plc, as contained in the unaudited financials may celebrate it too soon, with the congratulatory smile giving way onto disappointment and possibly anger.
The cost and expense lines that all recorded three-digit growth were enough to throw International Breweries, recently acquired by Belgian giant brewer- Anheuser-Busch InBev SA/NV, into the red for the period.
Specifically, revenue soared 175.2% up from N9.435bn in the first quarter of 2017, to N25.966bn.
This was slower than the 226.53% jump in cost of sales from N5.143bn to N16.793bn, the bulk of which was the N12.047bn variable production cost, that rose from N4.203bn. It was followed by the variable distribution cost that rose from N551.749m to N2.293bn; while “variable other costs” climbed to N526.925m from N188.707m. The rise was even despite the non-payment of royalties, compared to N24.711m in the 2017Q1.
Administrative expenses growth was even faster at N6.299bn, representing a 300.28% rise over the N1.573bn reported in the preceding Q1, with “paycosts” gulping the lion’s share of N2.095bn, up from N593.1m; while depreciation accounted for N2.043bn, as against the previous N380.305m; as well as N723.24m maintenance cost, up from N246.184m, among others.
Other income for Int’l Breweries was negative at N134.97m from N0.24m. Marketing and promotion expenses stood at N1.533bn, as against the N412.75m reported in the 2017Q1, representing a rise of 271.6%, a breakdown of which showed that above the line (sales promotion, in-bar activation & POS materials) cost N1.208bn for the period, as against N1.208bn, compared to the previous N181.586m; followed by the N275.056m that went into below the line (outdoor, radio and TV, newspaper adverts), from N187.901m. Indirect marketing cost took another N50.203m as a new expense line, while spending on corporate brand management was nil, as against N43.264m in the corresponding Q1 of 2017.
Worse still, finance income dropped to N308m from N2.946bn, being interest received, while finance cost literally broke loose at N3.604bn, up by 367.02%, when compared to N771.76m. Interest paid on bank loans jumped to N3.604bn from N341.25m; leaving loss before tax at N2.577bn from a previous profit of N1.498bn, up by 271.94%.
Loss after tax came to N2.24bn from a N1.361bn profit, translating to Loss Per Share of 26 kobo, from a profit of 16 kobo each, as net profit margin slipped also into negative territory at -8.63%, up from 14.43%.
If there is one thing that is sure however, the management of International Breweries may need to explain the situation and offer investors and traders some assurance of a turnaround, if anything as such exist as expected.