After 11 yrs of losses: International Breweries makes N154.

8m profit
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After 11 successive years of losses, International Breweries Plc, in 2008 financial year, recorded an operating profit before tax and exceptional items of N154.8 million as compared to the N64.2 million posted in the previous years. This improvement was largely due to the significant increase in turnover, which rose from N561.7 million in 2007 to N931.9 million in 2008, an increase of nearly 66 per cent. Gross profit thus increased from 28.8 per cent of turnover in 2007 to 41.5 per cent in 2008. These were contained in the statement of the Chairman, Board of Directors, Mr Gil Mortignac, to shareholders for the 32nd annual general meeting which held in Ibadan on Wednesday. According to the chairman, year 2008 was marked by two major events that had significant impact on the future of the company. Following the successful conclusion of the offer to the public of 1.6 billion new shares, the company received the net proceeds of the offer in January 2008, allowing management to proceed with the full implementation of the planned rehabilitation of certain sections of the production facility (refrigeration and steam generation in particular) known collectively as Rehab II, he remarked. The chairman noted that the second event was the decision by the Warsteiner International KG, longtime owners of the majority of the shares of International Breweries Plc, Brauhaase International Management, to sell its subsidiary to the Castel Group effective September 2008. Castel has acquired huge experience in Africa and owns and operates some 60 breweries in 24 African countries as well as having stakes in breweries in an additional 25 countries, producing in excess of 35 million hectolitres annually, he added. Speaking on the business environment, Mr Martignac pointed out that although the macroeconomic picture remains relatively healthy, the trickle down effect for the mass of the population of the oil sector, as the major economic driver remained elusive, as high unemployment, high poverty level and the attendant social problems continued to be a major obstacle to real and board-based economic growth. The operating climate for manufacturers in general remains difficult but it is gladening to note that, overall, the beverage sector in Nigeria continues to enjoy substantial year-on-year growth. Nevertheless the future is uncertain.

The brewery industry relies heavily on imported raw materials, notably malted barley, the comparative strength of naira compared to certain foreign currencies, notably a weak US dollar, had, for a time during 2008, allowed some companies to temper the effects of the spiraling costs of raw materials generally, this was not the case for imports made in Euros, he remarked. The chairman said the devaluation of the naira against major currencies around the end of 2008 had adverse impact on all operators that relied significantly on imported raw materials. He stated that concurrent with the investment in plant and equipment, management had increased its programme to recruit new and highly efficient staff to meet the skills deficiencies that the company had been facing. This is with a view to enabling International Breweries respond to the challenge of producing 400,000 hectolitres annually.
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GAINERS Oando Plc NB Plc GTBank FCMB Plc Dangote Cement LOSERS GUINESS Nigeria Cadbury Nig Lafarge Wapco Ashaka Cemment Flourmills Nig Share Opening 62.00 76.00 19.02 6.40 124.89 Opening 195.00 25.06 40.98 26.25 85.00 Closing 66.15 77.78 20.40 7.03 125.50 Closing 186.00 22.00 38.50 24.00 83.00 Change 6.69 2.34 7.26 9.84 0.49 Change -4.62 -12.2 -6.05 8.57 -2.35

Commodity Prices
. Last ($) Net Change ($)

Brent Crude Gas Oil Crude Oil Gas Natural Coffee Cocoa Sugar Share

119.10 1,000.75 108.31 4.34 260.45 3,013.00 27.45

1.74 11.50 1.59 -0.05 -3.70 61.00 0.34

After 11 yrs of losses: International Breweries makes N154.8m profit

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. After 11 successive years of losses, International Breweries Plc, in 2008 financial year, recorded an operating profit before tax and exceptional items of N154.8 million as compared to the N64.2 million posted in the previous years. This improvement was largely due to the significant increase in turnover, which rose from N561.7 million in 2007 to N931.9 million in 2008, an increase of nearly 66 per cent. Gross profit thus increased from 28.8 per cent of turnover in 2007 to 41.5 per cent in 2008. These were contained in the statement of the Chairman, Board of Directors, Mr Gil Mortignac, to shareholders for the 32nd annual general meeting which held in Ibadan on Wednesday. According to the chairman, year 2008 was marked by two major events that had significant impact on the future of the company. Following the successful conclusion of the offer to the public of 1.6 billion new shares, the company received the net proceeds of the offer in January 2008, allowing management to proceed with the full implementation of the planned rehabilitation of certain sections of the production facility (refrigeration and steam generation in particular) known collectively as Rehab II, he remarked. The chairman noted that the second event was the

s International sees FY profit dip, sales rise

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Efes Breweries International has reported a slip in full-year operating profit for 2008, despite an increase in net sales in the period. The company, which is majority-owned by Turkey-based beverage giant Andalou Efes, said late last week that its operating profit for 2008 fell by 8.6% on 2007, coming in at US$73.6m. The decrease came in spite of a 24.1% leap in net sales, which totalled $1.04bn in the year. Volumes also improved, rising by 5.5% to 14m hectolitres. EBI recorded a net loss of $57.4m in 2008, however, against a net profit a year earlier of $37.5m. Expenses in the year rose due to non-cash foreign exchange losses due to the strengthening of the US dollar against local currencies. The company was also hit by "higher financial indebtedness" compared to 2007, due to increased funding requirements for the acquisition of Georgian drinks group Lomisi last February, increased working capital needs due to higher commodity prices and a capital expenditure requirement of $171.4m to pay for capacity increases in Kazakhstan and Moldova as well as in malteries in Russia. In Russia, which accounted for 78% of EBI's volumes in 2008, the market delivered "moderate" growth in the first six months of the year, although volumes turned negative in the second half, on the back of lower than average temperatures and the deteriorating consumer confidence as a result of the global financial crisis. Higher than inflation price increases in the beer market also had a negative impact on consumption, the company noted. EBI's chairman and CEO, Alejandro Jimenez, said: " 2008 has been the start of what we can call a 'once in a lifetime' global economic crisis. The inflationary pressures in our operating markets, combined with the significantly deteriorated consumer confidence in the second half of the year impacted the sales volume performance of our markets. "In 2008, one of the key challenges in the brewing industry has been the increased cost of raw materials. This had a negative impact on our profitability in 2008, in line with our guidance, yet at a lower rate for the full-year compared to previous quarters. We believe that our business is robust, but this doesn't mean we are not increasing our defence strategies against the challenges being post by the negative macroeconomic developments." EBI said it will focus on managing its working capital going forward, by cutting its capital expenditures by almost half on 2008. "We are confident that we will complete the challenging year ahead with a solid operating performance," Jimenez said.

How we revived International Breweries Daramola

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FROM the depth of abyss in 2005, characterised by a backlog of salaries, obsolete equipment, under-capitalisation and a weak franchise, International Breweries (IB) Plc, Ilesa, Osun State, was able to weather the storm and, thereafter, transform to a profitable and consolidated enterprise, courtesy of a blueprint drawn by Chief Michael Daramola-led management team. Narrating the circumstances that heralded the re-birth of the, hitherto, ailing brewery to Tribune Business during an interview on Wednesday, in Ilesa, Daramola, who is the Managing Director and Chief Executive Officer, disclosed that drastic measures were embarked upon to salvage the company from the brink of collapse. When I took over in 2005, IB Plc was bogged down by multiple problems, which included lack of plan for equipment maintenance, in addition to obsolete equipment. The company was overstaffed, with a backlog of salaries, while the production was channelled to only one product, despite the fact that distributors paid down for weeks, he stated. He further told the Tribune Business that the company was also owing entitlements and gratuities of staff, while suppliers and creditors of the brewery were also being owed for services and goods supplied in the past 3-4 years. In addition to these, there were financial leakages, recruitment errors and besides, the company was under-capitalised. There was a complete lack of vision to change things. The task before my team was to restructure the brewery and return it to profitability. We commenced a strategic restructuring by embarking on a relief of the staff burden by 45 per cent, tactical lay-offs and the concomitant staff emoluments were systemically settled to the extent that full entitlements were paid to affected staff. Outstanding salaries were paid. All these emoluments amounted to N350 million. Chief Daramola stated that in a bid to beef up working and share capital, the company approached the capital market for the first phase of a public offer at a period the Nigerian Stock Exchange (NSE) was considering de-listing it from the list of quoted companies. According to Chief Daramola, officials of the Exchange had advised the company to prepare for wind-up and receivership when the publc offer proposal came and was only given consideration due to what some investors, especially institutional ones, referred to as implicit confidence in his ability to turn things round. Even though it was initially a mixed bag of tricks due to skepticism on the part of investors, we, however, recorded over-subscription of 65 per cent on the offer and the proceeds were invested in procuring a new cooling system which accounts for 90 per cent of brewering

function. We also put in place a bottle washer and other infrastructural facilities to give the company a lift. Today, International Breweries has taken back its rightful position in the brewing industry and has moved from producing only one product Trophy to other products, including Castel, Kronenburg, Wilfort Dark Ale. More importantly, for the first time in 13 years, we recorded profit of N153 million in 2008, declared the IB CEO. Having achieved the successful turnaround of International Breweries founded by Dr. Lawrence Omole, Chief Daramola affirmed that the priority objective of the management is to complete its canning line of production which would not only increase production to 30,000 hectolitres daily, but make its products available to consumers in cans. We are building up on our present level of trajectory performance by investing in plant and equipment and thats why we have a mixed bag of balance sheet. Hopefully, this will erode off in 2010. In another one to two years we will be in cruise control, after recovering from the huge outlays and civil works. the IB CEO enthused. Daramola holds a first class-degree (honours) in Industrial Finance from the defunct U.S.S.R. and also a masters degree and is currently the second Vice-President, Association of Food Beverage and Tobacco Employers of Nigeria.
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