Brewery Industry Records Decline In Profit Margin As New Excise Duty Dampens Consumer Demand

The brewery industry in Nigeria, the second largest beer market in Africa has recorded a decline in profit margin in the second half of 2018, as the new excise duty recently introduced by the government takes effect.
The result is that consumer demand was further dampened.
The impact can be seen in the four per cent decline in revenue of Nigerian Breweries to N183.7 billion. This led to a corresponding 22 per cent reduction in profit after tax of N18.4 billion.
The situation was different for Guinness Nigeria Plc. Its revenue increased by 13.6 per cent to N143 billion, while its post-tax profit rose 299 per cent to N6.7 billion.
Nevertheless, Nigerian Breweries paid a dividend yield of 4.22, while Guinness paid 1.94.
Bismarck Rewane, Chief Executive Officer of Financial Derivatives said, Guinness revenue was driven by increased sales volume for Guinness, Dubic and spirit brands.
He believes that Guinness is committed to a sustainable growth by securing stout leadership, retaining leadership in flavoured drinks, building on momentum in malt category and devoting more resources and capability to lager.
10 per cent excise duty, which included a price increase of beer and malt was rolled back, whereas SAB did not follow the move of the price leaders, showing the difference between a duopoly and oligopoly.
The proposed rate of 400 per cent increase over three years is excruciating and will kill investments in the sector if not reviewed.

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