Guinness Nigeria has revealed that it was forced to take a loan from parent Diageo, related to dollar shortages in the country. The announcement came even as the unit reported its first full-year pre-tax loss in 30 years.
Guinness Nigeria said it took a $95m loan to help cover dollar shortages, caused by the sharp drop in prices of crude oil. The Nigerian economy is in a recession, and in June, the country’s central bank allowed the naira to float free – a move that has seen it lose almost 40% of its value against the dollar since.
The pressure on imported goods meant the unit’s currency requirements were much bigger than what it could source locally and from exports, forcing it to turn to Diageo for the loan (priced at 3-month Libor plus 4.75%). The company also said it will change strategy to avoid such issues again in the future, noting: “Longer term we intend to source raw materials locally”. It will also begin locally producing spirits in 2017.
Guinness Nigeria also recorded a pre-tax loss of 2.35bn naira for the year ending June 2016, compared to a profit of 7.8bn naira last year. Revenue was down 14% to 102bn naira due to lower consumer demand and currency fluctuations, while operating profit was down to 4.4bn naira (from 15.7bn naira).
Guinness said it would lower its dividend to 0.50 naira, from 3.20 naira in the preceding year.