Guinness Nigeria Plc has posted a profit before tax of N3.8 billion for the first half of its financial period ended December 31, 2018, in its unaudited results released to the Nigerian Stock Exchange (NSE).

The earnings, which represented a N251 million increase, came on the back of lower finance charges, that was boosted by proceeds from the company’s rights issue.

The subsidiary of Diageo Plc affirmed that the gains from reduced cost of funds due to the proceeds of the rights issue were enough to offset the declines in operating profit associated with challenging business environment.

However, the company’s net sales declined four per cent in the period under review, primarily driven by the ongoing pressure in the lager segment, as a result of the continued challenging operating environment.

Double-digit growth in spirits and continued growth in Guinness, also mitigated some of the decline in the period, despite 15 per cent decline in the gross profit, as a result of reduced net sales.

There was also continued inflationary pressure on the raw material costs and lower fixed cost absorption, even as marketing spend decreased 10% due to continued focus on investment behind the biggest growth opportunities.

Operating profit declined by N2 billion, as the productivity initiatives around marketing spend, distribution expenses and administrative expenses mitigated some of the inflationary cost of sales pressure.

The Managing Director/Chief Executive Officer of Guinness Nigeria, Baker Magunda, said: “In the half-year ended 31st December 2018, we delivered results that reflected the continued challenges in the operating environment.

“While lager remains a challenged sector, Guinness and spirits recorded strong growth, and our non-alcoholic malt drinks grew in the face of intense competitive pressure. This re-affirms our total beverage alcohol portfolio strategy, as a key driver of sustainable growth in the market.

“Looking forward, we will continue to focus on our strategy which is now based on four strategic pillars of growing our premium core faster, delivering our target cost absorption, continue innovating to meet consumer needs and driving productivity harder to improve performance in the business.

“While we are conscious of the continued challenging operating environment with double digits inflation and pressured consumer spending, we remain optimistic about the execution of our strategy for the remainder of the 2019 financial year”.

The Chairman, Babatunde Savage, added: “The board is confident that our strategy is sound and we are making the right investments in the company to ensure long term competitiveness.

“The board continues to support the management in its efforts to build a business that aims to consistently deliver growth for stakeholders.”