BrandsCorporate ScorecardsNews

IB Plc :   Tales of  a Serial Corporate Looser      

    When Belgium’s AB InBev, the world’s largest brewer, acquired SAB Miller Nigeria, former owner of International Breweries, Pabod Breweries and Intafact Breweries  in 2016    ,   many  observers and analysts  believed  it was a signal  that  the end of decades of dominance of the brewery industry by Nigerian Breweries and Guinness ,Nigeria Plc has come  .

  The current owner did not stop at that .  It   invested  over $250million in the Nigerian beer industry by Q2 2018  and   merged  the three entities into one  under  the name  of International Breweries in 23 Mar 2021  to further sharpen   its  competitive edge,  ; between September 2021 and September ,2022 , by  117 %  increment  to   N35.13b  from N16.18b   it   acquired  property, plant and equipment  to further  beef itself up  . Even its  Managing Director,  Mr. Hugo Dias Rocha did not hide its strategic intent : “Our dream of achieving market leadership of the beer industry in Nigeria remains unshaken as we are confident in our abilities and commitment as a team.”

 Since the   takeover by  this  beer giant  ,International Breweries   has cast a shadow bigger than its size.    Indeed  , the new owner  of IB Plc is not hiding   the  fire in its  underbelly and is sending a   signal  of how ambitious  it  is ; one thing is clear  about  these  initiatives  : they continue   t o   send  jitters down the spines of the incumbent market leaders in the industry at one time or the other  .         

 However ,  against the hope raised and stakeholders expectations , the portents are increasingly gloomy .More and more signals are pointing to  the other directions  ; despite this intimidating image , to the surprise  of  industry analysts ,the company has only become  a mere serial losers ; for its inability to translate its huge potentials to the expected fortunes   but  instead sustaining back to back losses in the last five  consecutive financial years ,the company   has turned  itself to  an albatross for its shareholders   ,creating more fears  than dreams on their  faces  .         .

  International Breweries Plc has remained in the wood for long against the big  hope raised by its new owner to change the calculus of the   industry leadership  , and there is no respite for its recovery .  Its 2021 FY Audited Financial Statement, revealed  a loss after tax of N17.66 billion ; before this , the brewery had  declared bottom line loss for three consecutive years since 2018, posting a loss of N3.93 billion. In 2019, the loss declared spiraled by an overwhelming 607% to N27.79 billion ;  its loss ,however ,declined  in 2020 to N16.08 billion. Within the three years,  ironically , the company grew its revenue by over 51% on the back of inflationary pressures driven by increases in prices of goods and services over the years.  This implies ,this potentially giant brewer is making money but finds it difficult to translate to net income or bottom line

In the ongoing financial year, a glitter of hope surfaced in the first quarter . International Breweries Plc in its first quarter ended March 31, 2022 reported stronger growth in revenue backed by consumer demand for its brands to migrate into impressive earnings and positioned to deliver  enhanced profits in 2022 financial year. The volume growth was ahead of industry expectations that drove revenue by 48 per cent in the first quarter of 2022 and contributed to the company’s migration from loss to positive results in the period under review. The unaudited first quarter, 2022 financial result and accounts of International Breweries showed N57.52 billion  revenue  from N38.96 billion reported in Q1 2021. 

 But this hope dramatically fizzled out in the second  and third quarters signaling another doom in 2022 .Although ,  International Breweries Plc ,makers of “Hero” Lager ,  reported a Profit After Tax of N336.20mn for the half year period ended 30 June, 2022, a 102.2% upward push from the N13.88bn loss it reported for the same period in 2021,it was on the strength of the first quarter result .This is because in three months ,between April and June , it  recorded  another loss of  N384.97m . This loss ,however , could not be covered again in the third quarter; its loss for the period for that period was N3.15b and for the nine months was N2.81b in 2022 as against N2.22b and  N14.00b  losses in 2021 respectively .

 The unimpressive showings in the last five years are very much against its stakeholders’ expectations .Its shareholders have been at the receiving end of the above miserable scenario. One of the corporate  responsibilities of the top management  is to keep the shareholders satisfied ;shareholders  require maximum or adequate returns on their investments in order to remain invested in the company and to be willing to continue to provide additional resources and when needed.  From the shareholders point of view what matters is the cash generating capability of the business since this determines the ability to pay dividends in the short term and to reinvest for the future which enable the future flow of dividends payments.  The company has ,indeed , continued to generate cash impressively  confirming high demand for its brands  despite heated competition confronted by it .However , its capacity to manage the values   is questionable  ; its  cash generating  capacity, though  enormous  ,its cash flow shows its  cash  hemorrhages easily too   .  In third quarter of 2022 ,for instance ,its  cash and cash equivalents  at the end of the period  was N24.85b,70%   down from  N82.38b in the corresponding period of 2021 

Sequel to this  tragic  scenario  , its   shareholders have not received any  dividend since 2016 when it was taken over by Anheuser-Busch InBev  ; yet  ,more agonizing  is that  nothing tangible  is forthcoming as capital gain for them too .

 The current share price of International Breweries (INTBREW) is NGN 4.15. INTBREW closed its last trading day (Friday, November 4, 2022) at 4.15 NGN per share on the Nigerian Stock Exchange (NGX). International Breweries began the year with a share price of 4.95 NGN but has since lost 16.2% off that price valuation, ranking it 118th on the NGX in terms of year-to-date performance. Shareholders’ worries are compounded by the fact that INTBREW has lost 8% of the stock’s value from October 6th to date  

INTBREW Stock Market Performance


A good way to determine earnings to the investor is the Earning Per Share (EPS), which is the monetary share value, i.e., what every share issued by the bank will receive from declared earnings. The higher the EPS, the more profitable the company is. International Breweries EPS has been consistently negative in the last few years ;it  worsened from  8k to 12k negatively in third quarter of 2021 compared to the same period of 2022  .  Full five  years  EPS for  the company  have been largely negative .      It was only in 2017 it recorded a positive EPS  of 16k . Its   EPS took negative postures  in four out of five years  consecutively : 66k ,in 2021 ; 61k,in 2020  ; in 2019 ,  N1.16k and in 2018,  45k  per share  .  This means that investors holding shares of  International Breweries are consistently at the receiving end of its poor performances since it came under a new and current  ownership .

However , while   EPS refers to corporate value and  does not indicate cash value to the investors,  even its  dividend yield which does this is not saying a different as regards the misfortunes unleashed by IB Plc uninspiring runs in the past few years  on its shareholders as the company has not reported any recent payouts   .

 How does INTBREW dividend yield compare to the market?
SegmentDividend Yield
Company (INTBREW)0%
Market Bottom 25% (NG)4.2%
Market Top 25% (NG)8.9%
Industry Average (Beverage)5.0%
Analyst forecast in 3 Years (INTBREW)0%

 The dividend yield also allows investors to compare International Breweries  shares with other non-equity products like Treasury Bills and Commercial paper; this makes investing in this company by those that cannot exercise patience unadvisable  as other alternative channels are more profitable in terms of returns . 

A final measure   that exposes the hopelessness of the  InterBrew investors  is the Price to Earnings Ratio (P.E.) which is the Price of the stock divided by the earnings of the stock. P.E. is useful in determining how “cheap” or expensive a stock is.   It will be factually incorrect to simply say that one company share is cheaper because the market price is cheaper, we have to look at the P.E. ratio. For International Breweries ,  its PE ratio at  -32.5x exposes the poor investors’ perception of  the company’s performance . This is a confirmation that this  company is losing money or with negative earnings   and investors  must not invest in companies with consistent negative P/E ratios as they may go bankrupt.  Analysis of its  returns on earnings trend indicates INTBREW is unprofitable, and its  losses have increased over the past  five   years at a rate of 27.2% per year ;it    has a negative Return on Equity (-2.49%), as it is currently unprofitable.

  QUARTER 3 ,2022  : Cataclysmic Loss Again      .

 A critical analysis of its q3 ,2022 results  shows   the company’s operational scenario has not departed from what it used to be   in the last few years . While it  indicates it is not yet out of the wood ,it also confirms  its inability to do this  is not because it could not generate impressive revenues or lack of demand for its products but its  top management less impressive control over some macroeconomic headwinds  triggered by inflationary pressures, high operating costs and consumer’s low purchasing power   leading to another looming year of loss at the bottom line .

 This is confirmed by  its value creation mechanism  which shows the  financial management pedigree  of  the company’s leadership   is still below stakeholders’ expectations . This may not be farfetched .      One evidence   of these inabilities comes from  the  funds   from operations   ,clearly major contributors to value creation  . Although  the  sales revenues   determined by sales volume and the prices that an  organisation is able to maintain in its markets  have remained positive and competitive   ,the production and selling costs that are made up of fixed and variable elements and overhead or indirect costs have continued to  put its revenue profile under serious threat .

The ugly scenario painted above , however ,  could be easily traced  more to the inclement  environment . In the last nine months in 2022 as it was in 2021, and indeed few years back in time, the competitive space in the brewing  industry  has been  paved with the  daunting challenges posed by strong macroeconomic headwinds   , setting up the industry for failure. These include the erratic supply of public electricity, falling naira, weak logistics, insecurity, and other high costs of operations attributable to poor infrastructure which have continued to make the business operating environment difficult, especially for the real sector of the economy    

   Despite this   International Breweries maintained a steady revenue growth profile. In the last  nine months of 2022 , the brewing giant helped more Nigerians to reach for more trophies  as they imbibed more of  its  brands . Financially speaking,  it translated to  a 5.6% rise in the amount of products consumed in the period . That is, it swelled from N46 billion in Q3 2021  to  N49 billion .Much of the success can be pinned to the  management initiatives including excellent promotions the company embarked upon in the period .Moreover , the company noted  , this could be attributed to its  resilience during the period led by its  core brands, premium portfolio and innovation. As part of  its “Beyond Beer” strategy, the company launched Flying Fish during the quarter to address incremental occasions and consumer needs. The company claimed this had been well received and continued  to gain acceptance in the market.


All of these had a significant impact on sale even if it hiked the cost of doing business. To sell these liquids of pleasure is not always easy for bottlers and brewers as is the case for all manufacturers. The trend is that the cost for that as represented by the cost of sales on the profit and loss account never goes down. The only direction it travels is northwards. During the period, the cost of sales was valued at N38 billion, a 17 percent high from the N33 billion in the same period last year . However , while IB Plc posted positive revenue  in 2020 and 2021 and continued this  in 2022 financial years ,the company has been achieving these  higher revenue  numbers on the back of vastly increasing cost of sales .   In 2020 financial year ,to achieve N100 revenue , it cost it N78; in 2021 ,N75 and currently in the  third quarter of 2022 ,it took it N79   .This is reflected in its consistent negative EPS    . This indicates IB Plc is willing to incur huge marketing costs to capture market share . 


It was this inability to  carefully  tame the cost of sales that  hit hard on  the gross return of the Manufacturer of  Trophy larger in the current financial year  .Consequently ,   the gross profit stood at N10 billion from N13 billion in the same period last year.


 Doing business in this environment requires a hulk of expenditure whose destructive aim is to shatter an operator’s profits. It is the reason why the company’s operations cost hiked up  significantly by to N1.3 billion from N131 million in Q3 last year.  


 With the fleet footed cost of doing business, the company’s  trading    profit got down  to a loss of N3.94 billion in the third quarter   from  N366.56m operating income .

   ,    .

 Another angle that shed  some lights  on the company’s performance in the period under review as in the last few years is its   financing  income relative to its to its financing  costs or the mix of capital between the debt  which requires interest payments and equity is another  ; this usually determines the cost of capital and financial risk .   In the period  under review there is every indication that the company is highly leveraged . This is where the company  received the most cataclysmic  misfortune .  A  look at IB Plc  Equity multiplier , a leverage ratio that measures the portion of the company’s assets that are financed by equity confirmed this as much .   A high multiplier indicates that a significant portion of a firm’s assets are financed by debt, while a low multiplier shows that either the firm is unable to obtain debt from lenders or the management is avoiding the use of debt to purchase assets. As at September 2022, with a total assets of   N414.97b   and  its total equity of N135.80 as against N469. 95b and equity of N 135.30b  , in  the corresponding period of 2021, leading to IB Plc equity multiplier of 3.06 in the third quarter of 2022 and debt to assets or debt ratio is 0.67 or 67 %,indicating it  financed  67% of  the assets by debt .     

 This funding  strategic direction was highly disastrous . Although the positive performance from the finance income or interest received from the company’s prudent investments in the financial market    was up by 375% to N2 .80b  from   N588.41m , however , this was  too feeble  to cage the finance cost that hit  N7. 11b in September ,2022  from  N949.72m  in September 2021  . Ultimately, with heavy finance cost which jumped by  273 %  this resulted in  a net finance costs  of  N4.31 b  as against  net finance cost of  N1.32b  in September ,2021 .   Consequently this messed up the company  and led to a tragedy that hit the pretax profit   .

   The equity multiplier posed a high risk to its creditors, although  the company is confident of its impressive cash flow history ,notwithstanding   because the  company  incurred  high debt service charges  this depreciated its heavily within the period under review .  Sequel to this its   Net cash inflow from operating activities was down to N20.16 b from N40.61b  while its Cash and cash equivalents  at the end of the period  nosedived heavily to N24.85b from N82.38b     

 Furthermore , investment in assets  is another critical determinant  of the bottom line  .This  affected  the value creation through the cost of capital investment , disposal of redundant assets and  the management of the elements of working capital like stocks ,debtors and creditors which can increase or decrease shareholders value . The company planned   to improve facilities as it  committed   N35.13b  investment  in September ,2022  , a 117% jump   compared to  N16.18b it invested the year before September 2021   for the  acquisition of property, plant and equipment .This impacted heavily on its cash flow in first nine months of the current financial year .                              

   However ,  since the  value created from assets invested usually   rests  on the extent to which assets and working capital are  stretched by the company,  the degree of values  added   to the fortunes of this company  depends on  its  competences   . Though , the investments  may be a drain on its cash flow during the period under review  or not adding  much value  now , this  is  a move that investors should be interested in because investment signals improvement and better results on the floor of the Nigerian Stock Exchange. The move itself indicates that the company’s management is a subscriber to the never ending improvement principle  and these investments have strong potentials to the bottom line in the subsequently years  by supporting much higher levels of business from the same asset base than others 


The miserable   performance only worsened its profit margins, indicating inefficiency in terms of the contribution of turnover to gross profits, pretax and net profits.

Pretax margins which, is an indicator of how well the company is doing at controlling costs strolled upwards from -13.5 percent to  -1.8 percent. That is it lost almost 2kobo from every one naira of turnover as opposed to 13.5k loss in the corresponding period of 2021. 


The slow-moving  in pre-tax margin was contagious pinning net profit margin to a loss of  2k  percent from-11K  loss  in  the same period  last year. The margin not only  improved  with the loss coming down , it also represents gains for the company in a year that inflation remained at double digits.


The damaging impact  of its net  finance  cost  is visible on its  pre tax Profit  as it  cascaded leading to  a loss of N4.67b      from a similar by lower loss of    N132.02m   in 2021            


 Ultimately , the increase in the cost of sales and other expenses led to a loss record for the period to the tune of N3.1 billion compared to a  similar loss  of N2.2 billion same time last year. 


However ,the company’s  cash management ability  worsened and therefore its  liquidity in the period under review ; the company needs to  re- jigging its debt profile in the process


The  IB Plc   got  its payment faster by  16   from debtors as its days receivable  shortened  to 56 days from 70 .This is as its   receivable  turnover improved to 5.6 from 6.5    

PAYABLE TURNOVER .It however delayed   payments to its creditors by 365    days  the same time last year .

INVENTORY TURNOVER Stocks in the company’s warehouse spend less time before they are shipped to customers. The  inventory last  61 days when previously they sat around for  73 days      


 All of this ensured a shorter cash cycle for the company, falling to  482 days from 508  days.


The improved cash cycle did little to improve the company’s liquidity as current ratio sank. This, ostensibly, is because of the company’s increased debt profile   than  it had none in the previous year.

But overall financial leverage is  greater  than last year because the company did not succeed in vanquishing term loans, making the company  less  attractive to investors.

 Beyond the negative impact of its funding strategy on its profitability, the damaging effect  of this on its liquidity is equally enormous.  A look at its current ratio which measures how well is a business able to pay its current liabilities using only its current assets  confirms this assertion. In third quarter of 2022 ,its current ratio at 0.45 compared to 0.53 in the corresponding period of 2021  This is an indication that    the company cannot  currently meet its financial obligations peacefully . This is equally applicable to its quick ratio which worsened from 0.33 in the first nine months of 2021 to 0.29 in 2022 . If the quick ratio is under 1, this would instead indicate that the company would have difficulty paying its debts.

But the company is still attributing misfortunes to institutional factors .The company in a statement however said its volumes declined in the third quarter of 2022 due to a soft industry and ongoing supply chain constraints.   Hugo Rocha, the company’s Managing Director, attributed the development to ongoing supply chain constraints, and the impact of inflation on consumers’ disposable income in the last three months.   

He states, “The last three months have been characterized by elevated inflationary pressure which has had an impact on consumers’ disposable income. The period experienced especially severe weather with a longer rainy season and floods in key markets. However, despite the difficult quarter, we remain focused on our winning commercial strategy. Year-to-date, our brands remain resilient and continue to deliver volume growth.  We remain committed to returning to profitability and creating value for our stakeholders.” 

Although there is no doubt that monetary and fiscal policy, trade and industrial policy, national levels of educational achievement, the structure of corporate ownership, and the social norms and values that predominate in a particular  environment    have an impact on the competitiveness of firms , Yet too often executives have used supposed institutional disadvantages as an escape clause for poor competitive performance .

     In blaming institutional factors for competitive ill-health, companies are prone to overlook the institutional disadvantages of their rivals  

Show More

Related Articles

Leave a Reply

Back to top button