HOW RECESSION IS TRAINING NIGERIAN BREWERIES MUSCLES.

In 2016 financial year, Nigerian Breweries plc had to contend with three major pressures on its bottom line principally in view of the current recession in Nigeria: Cost of sale relative leap, cost of funds growth and still threatening illiquidity.

The cost of sale cross was evidenced by 19% growth to N178,218.5m in a year core income rose by only 6.75% to N313,743.1m leading to 6% drop in gross profit.

Nigerian Breweries was able to keep marketing and distribution cost growth within 4.89% to N61,615.3m and even decrease administration cost by 8.53% to N21,924.8m but its profit before tax ended 27.2% down at N39674.5m because finance charges jumped by 66% to N13,645.6m.

Finally, finance charges was that high because under intense liquidity pressure, NB went for N17bn in long term loans yet working capital deficit still closed the year at N69,696m though down from 2015's N82,597.9m deficit.

Such developments stretch corporate demanding new growth areas and strategies. On this, NB seems to be responding fairly.

For example, coming to terms with its liquidity position, shareholders are to be given the option to receive 2016's final dividend in shares as against cash. With Heneiken and its associate owning above 50%, this option is likely to get their quick nod because technically, any shareholder who opts for cash will only water down his holding in NB.

To help cage cost of sale growth NB is now banking on more local content by engaging in research to increase the yield of sorghum through two varieties already developed.

NB has also entered into supply agreement for local cassava starch and in addition, has in place offtake arrangement for local supply of sugar cane to replace imported sugar.

Besides, to promote higher energy usage efficiency, two more beweries now run on gas bringing total to 7; while phased implementation of bio gas re use at boilers has begun. In the end energy consumption dropped by 2% and water usage went down 9% in 2016.

Decoded: Tough times bring out the best in an economy; all that is needed is enabling policies and policy consistency to help tested muscles grow.

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