Golden Guinea Breweries Plc (NSE: GOLDBREW) is back to profitability. It posted a profit of N18.88 million for the second quarter period ended 30 September, 2020. This was contained in its unaudited financial statements for the second quarter ended 30 September released earlier today to the Nigerian Stock Exchange (The NSE) and the investing public.
GOLDBREW had suffered major machine breakdown, fire incident, including boiler explosion in February 2003, which affected its earlier operations. Ever since then, efforts had been made and active steps were taken to resuscitate the company.
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These efforts culminated in the company commencing operations earlier this year.
Analysis of the report: Profit/Loss Statement
The company’s revenue grew from nothing in the H1 period ended 30 September, 2019 to N424.146 million for the period in review. The fact that the company built on the N182.810 million recorded in Q1 2020, by adding another N241.336 million in Q2 2020, gives an indication that the company in heading in the right direction.
Nigeria is the company’s primary geographical segment as all of the company’s sales are made in Nigeria, and all of the revenue are usually derived from brewed products. The sales revenue reported were predominantly from the South-Eastern geographical segment.
The brewer spent N127.458 million on selling its products. This represents 30.05% of the company’s revenue, and a Gross Profit Margin of 69.94%.
From the sale of scraps, GOLDBREW was able to make N3.489 million as other income. This is significantly higher than the N0.711 million recorded for the same period in 2019.
The Administrative Expenses jumped by 150.57% to N281.295 million, up from the N112.260 million recorded in the preceding year. This represents 66% of the company’s revenue.
Profit Before Tax (PBT) and Profit After Tax (PAT) increased by 117.57% to N18.880 million from a loss of N107.452 million recorded in preceding year.
With a very high administrative expenses and cost of sales, GOLDBREW’s Return on Average Equity (ROaE) was a merge 0.58%.
Analysis of the report: Statement of Financial Position (Balance Sheet)
Having gone into operations, the company burnt through over 60% of its cash coming into the year, with the Accounts Receivables soaring by 1,518.07% in just half year of operations.
- Total Assets rose by 40.56% to N7.017 billion, pushed primarily by an increase in Property, plant and equipment (H1 2020: N5.410 billion, H1 2019: N4.372 billion), increase in Inventories (H1 2020: N1.005 billion, H1 2019: N511.389 million) and an increase in the Accounts Receivables (H1 2020: N574.640 million, H1 2019: N35.514 million).
- Total Liabilities increased by 41.03% to N3.206 billion, the difference being the addition of new items on the current liabilities column; Other Payables (N335.618 million), Directors’ Fees & Allowances (N115.256 million), Deferred Taxes Payable (N16.252 million) and Other Tax Liabilities (N45.113 million).
- Total Equity rose by 40.16% to N3.811 million, as the company reduced its negative retained earnings to minus N2.058 billion from minus N3.150 billion.
Analysis of the report: Statements of Cash Flows
The cash and cash equivalent at the end of the year increased to N26.379 billion, up from N155,374 held as at 30 September, 2019.
- OPERATING ACTIVITIES: The company generated N56.415 million from operating activities (30 Sept 2020: minus N46.216 million).
- INVESTING ACTIVITIES: N75.242 million was used in investing activities, primarily for the purchase of property, plant ad equipment.
- FINANCING ACTIVITIES: N30.905 million was used in financing activities, wholly used for the repayment of loans.
About the Company
Golden Guinea Breweries Plc is a public company quoted on the Nigerian Stock Exchange. It was incorporated on 26th September, 1962. The company was incorporated as a private limited liability company under the name Independence Brewery Limited with registration number RC 3164.
The name of the company was changed to Golden Guinea Breweries Limited on 6th May, 1971. The company became a public company on 28th September, 1978.
The principal activities of the company are brewing, bottling and marketing of Golden Guinea lager beer, Golden Guinea malta, Eagles Stout and Bergedorf lager beer.
The company has 1,024,668,000 outstanding shares and a market capitalization of N829.981 million.
Its share price is 81 kobo, it last traded on the 16th of November 2020 when a total volume of 9,072 was traded.
Analyst’s view
It was a thing of joy to see Golden Guinea post profit as it indicated it has overcome its many years of challenges. However, when the N115.256 million new item recorded on its current liabilities column under the new item title “Directors’ Fees & Allowances” is considered, it can be seen that technically the profit reported amounted to nothing.
This new item is in addition to the high administrative expenses which was over 60% of the company’s total revenue, and the company could not show to what added up to the high administrative expenses.
Investogist Analyst rate GOLDBREW stock a SELL, as the Investor or Trader will be better off putting the money on some other stock.
By; Nnamdi M.
