In an investor call on Monday, Hans Essaadi, CEO of Nigerian Breweries Plc, the Nigerian unit of Heineken NV, delivered grim news, declaring that the company is currently facing its worst downturn in the history of operations in Nigeria. Essaadi attributed the challenges to a significant decline in the mainstream lager market, with Nigerian consumers struggling to afford beverages like Goldberg after a hard day's work.
One of the primary factors contributing to the downturn is the economic turmoil in Nigeria. The naira has depreciated by about 70% against the dollar since June, following the central bank's decision to allow more flexible trading. This depreciation, coupled with the resultant 153 billion naira ($99 million) foreign exchange loss, has dealt a severe blow to Nigerian Breweries.
The economic landscape in Nigeria further complicated matters, with inflation soaring to an almost three-decade high of 29.9% in January. The rising inflation rates have put immense pressure on household incomes, particularly in a nation where 40% of the population lives in extreme poverty.
Despite Nigerian Breweries reporting a 9% increase in revenues, the company recorded a net loss of 106 billion naira for 2023, a stark contrast to the 13.18 billion naira profit from the previous year. This drastic financial downturn is attributed to various factors, including cash scarcity resulting from the nation's demonetization program, high double-digit inflation, removal of fuel subsidies, and the devaluation of the naira exacerbated by foreign exchange scarcity.
Looking ahead, the company anticipates continued pressure on its operations in the coming year. However, Nigerian Breweries remains optimistic about long-term market fundamentals. To mitigate foreign exchange challenges, the company plans to source more raw materials locally and has implemented higher product prices since February 19.
Hans Essaadi expressed the company's commitment to weathering the storm, citing confidence in its portfolio, processes, and people. Despite the current challenges, Nigerian Breweries aims to navigate the economic turbulence and emerge victorious in the Nigerian market.
Source: Bloomberg
