The local unit of Heineken NV, Nigerian Breweries, continued its FX-induced lossmaking for the second year last year as the manufacturer posted N144.9 billion in net loss after a devaluation of the naira last January caused its reporting currency to slump substantially.
It recorded the negative bottom line even though sales improved by 80.8 per cent, taking revenue to a new milestone of N1.1 trillion, according to its audited accounts issued on Friday.
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The direct cost of production for the beer and non-alcoholic beverages maker rose to 70.5 per cent of turnover from 64.5 per cent as the cost of imported raw materials eroded revenue.
CEO Hans Essaadi said in April 2023 that imports account for almost half of Nigerian Breweries’ input costs, leaving it at the mercy of exchange rate swings.
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The spending on raw materials and consumables more than doubled to N615.5 billion during the review period, underscoring the gravity of FX pressures.
“Foreign exchange volatility and limited access to foreign capital created additional hurdles for businesses, while the lingering effects of the fuel subsidy removal and Naira devaluation significantly increased operating costs across industries,” the company stated in its earnings release.
The consumer goods giant said it used the proceeds of its last year’s rights issue to “significantly reduce future currency risks.”
Naira, its reporting currency, saw one of its worst outings in years last year when it shed roughly 41 per cent of its value, complicating matters for import-dependent businesses already grappling with sky-high price levels.
Net loss on foreign exchange transactions stood at N157.6 billion, 2.8 per cent higher than a year ago.
But the reverberations of its foreign exchange woes even went far beyond its base Nigeria.
“Net revenue (beia) was dampened by a negative translation impact of €1,656 million, or 5.5%, mainly due to the devaluation of the Nigerian Naira, and depreciation of the Brazilian Real and Mexican Peso,” the parent Heineken remarked in its own financial report issued on Wednesday.
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Heineken acknowledged Nigeria as one of the markets that drove a 1.6 per cent increase in its beer volume globally last year.
Net finance costs stood at N252.8 billion, up from N189.2 billion a year ago. Loss before tax went higher by one-fifth to N182.9 billion.
Last June, Nigerian Breweries announced the acquisition of an 80 per cent stake in Distell Nigeria, helping it branch out into the manufacturing of wines and spirits
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