Guinness Nigeria plc (GUINNE.ng) 2019 Annual Report

We have extracted the Chairman’s Statement from the 2019 Annual Report for Guinness Nigeria plc (GUINNE.ng), listed on the Nigerian Stock Exchange:

INTRODUCTION

Distinguished shareholders, representatives of regulatory agencies present, esteemed ladies and gentlemen, I feel honored to welcome you to the 69th Annual General Meeting of Guinness Nigeria Plc holding in the federal capital city of Abuja. I want to appreciate all our shareholders for the support you have given the Board and your Company over the years, especially in the last financial year despite the challenging economic environment in the country and I trust that we can count on your continued support.

Kindly now permit me to present to you, on behalf of the Board, the financial statements and reports for the financial year ended 30 June 2019. As usual, I will commence my address with an overview of the business environment and how it impacted our performance. 2018-2019

BUSINESS/OPERATING ENVIRONMENT

Over the past year there has been slight positive improvements in Nigeria’s macro-economic indices. Headline inflation rate has declined from 12.08% in late 2018 and moderated at between 11.0% -11.4% in the first half of 2019. There was also relative exchange rate stability during the year under review as a result of the sustained access to foreign exchange brought about by the continued operation of the Central Bank of Nigeria Investors and Exporters Window. On a positive note, there were successful general elections during the year with the incumbent political party returning to power at the federal level. The incumbent party also won majority of the seats in both the Senate and House of Representatives. It is our expectation that the business enabling policies and ease of doing business initiatives will be sustained in the 2nd term of this government. Despite the limited positive developments mentioned above, the nation’s socio-political and economic environment remains increasingly challenging.

According to the National Bureau of Statistics, the economy grew only by 1.94% in real terms in Q2 2019, down from 2.10% growth recorded in Q1 2019. This means the economy declined by 0.16% in Q2 2019. Also, businesses in Nigeria continue to be impacted by poor multiple taxation and high interest rates while the society battles with high unemployment rate, corruption, and insecurity. The country’s infrastructure remains significantly under developed: with crisis in the power sector showing no signs of significant improvement ̧ continued gridlock at the Lagos ports which has constrained access to the port and getting out imported raw materials and the general poor state of our roads and transportation network. Furthermore, government revenues continue to decline leading to larger budget deficits. As a result, federal allocations to states and local governments have waned resulting in the inability of many states to pay salaries and government contractors as at when due and leading to a general lull in the economy with the resultant effect of worsening unemployment which was reported to be at 23% by the middle of the year.

The challenges enumerated above have in no small measure contributed to the high cost of doing business in Nigeria and a drastic reduction in consumer purchasing power.

The resultant pressure on consumer disposable income is reflected in the performance of most companies in the economy. For most companies,n margins continue to decline with profitability under immense pressure. Despite the above challenges, we are pleased that your Company has remained profitable notwithstanding the high operating cost driven by the increased cost of inputs and cost of doing business. I believe that the strategic initiatives being implemented by the Board and Management will enhance the chances of profitability of the business in the coming years.

OUR PERFORMANCE

In spite of the challenges in the business environment highlighted above and the intense competition in the brewing industry, I am happy to report that your Company remained profitable during the year under review as reflected in the financial results contained in the Annual Report published as part of this year’s Annual General Meeting.

INNOVATION

Through the tough economic terrain, management continued to commit resources to support our brands and enhance innovation, resulting in the launch of 3 new exciting brands during the year. Baileys Delight was launched in January 2019, Guinness Gold, a great new premium lager brand, was launched in March 2019 and Orjin Herbal Gin in April 2019. I am happy to inform you that all the newly launched brands are delivering impressive volumes.

CORPORATE SOCIAL RESPONSIBILITY

Your Company continues to be a socially responsible corporate citizen contributing to the development of Nigeria in general  socially responsible corporate citizen contributing to the development of Nigeria in general and in particular the host communities in which it operates. and in particular the host communities in which it operates. During the year, we continued with our flagship responsible drinking programme called the Ember Months’ Campaign in partnership with the Federal Road Safety Commission (“FRSC”).

We visited motor parks in Lagos and Edo State where we educated commercial vehicle drivers, transporters and motorcycle operators on the negative consequences of drink-driving and on how to drink responsibly. It was also an opportunity for these commercial transport workers and other road users to sign the #JoinThePact pledge, a global initiative promoted by Diageo where road users make a pledge not to drink and drive. As part of the campaign, we donated digital breathalyzers units to the FRSC commands in Lagos and Edo State.

Similarly, in furtherance of the DRINKiQ initiative and Guinness Nigeria’s commitment to instil a responsible drinking culture, in January 2019, we partnered with the Lagos State Ministry of Transportation to train over 800 commercial drivers and road transport officials from different agencies such as the FRSC, Lagos State Transport Management Agency and the Vehicle Inspection Office. The DRINKiQ campaign was also taken to rural Nigeria; in Cross River state, over 3,000 people in 13 communities were reached using flashcards to educate them on responsible drinking and the consequences of alcohol abuse. Also, in furtherance of Guinness Nigeria’s desire to instil proper drinking habits among our young people, our DRINKiQ partnership with the National Youth Service Corps continued where 1,672 Corp members were inducted and provided with brochures and training materials for conducting.

DRINKiQ trainings in the communities where they are posted to serve. Guinness Nigeria continues to contribute its quota to the socio-economic development of the country through various initiatives such as the Diageo Africa Water of Life Programme, In Kebbi State, Guinness Nigeria partnered with WaterAid Nigeria to provide a solar powered water facility in D’ka, Wasagu Local

Government Area, Kebbi State. In addition, Guinness Nigeria and WaterAid Nigeria in collaboration with the Kebbi State Government provided 2,500 residents of the D’ka community with access to clean portable water. Similarly, our long-standing support to the Guinness Eye Centre continued during the year with Guinness Nigeria donating the sum of NGN 10 Million to the Guinness Eye Centre at the Lagos University Teaching Hospital and Guinness Nigeria Eye Centre Onitsha. Guinness Nigeria also partnered with the Royal Commonwealth Society for the Blind, also known as Sightsavers, in a project to tackle avoidable blindness where 230 women with cataract disease in Kebbi and Sokoto states benefited from surgeries supported by Guinness Nigeria.

Your Company continues to be a socially responsible corporate citizen contributing to the development of Nigeria in general and in particular the host communities in which it operates.

To further demonstrate our commitment to the Federal Government’s policy on diversifying the economy and promoting local content, Guinness Nigeria in January 2019 launched its agricultural scheme called “Grow with Nigeria.” The scheme will ensure that Guinness Nigeria is able to source its sorghum requirement from local farmers. Under the scheme, over 5,000 participating small-holder farmers across 8 states will supply sorghum to Guinness Nigeria. We expect that this initiative will contribute greatly to the growth of the economies of the communities where this scheme is being implemented.

THE FUTURE

The financial performance of our Company in the year under review was impacted by the factors earlier mentioned in my address. However, I am confident that the strategies being adopted by the Board and Management will put your Company on a sound footing to enjoy growth. We have made deliberate choices in where we are putting our investments as a business –in our brands and in our people. We are confident that these investments will yield dividends and improve shareholder return in the years to come.

I believe that with the successful conduct of the general elections, the constitution of a new cabinet and with the passage of the 2019 budget, the new government will earnestly begin implementing the Economic Recovery and Growth Plan (ERGP) with much need reforms in the power sector, ports and the general business environment in order to spur needed economic growth in our country and ultimately provide jobs for our people. Finally, as a Company, we will continue to innovate and invest in our brands. We are passionate about our products and we are working hard to ensure that our products are the preferred choice in every product category. We are confident that the investment and the hard work over the last few years will yield dividends and improve shareholder return in the years to come.

CONCLUSION

Distinguished shareholders, permit me at this point to thank the management team led by Mr. Magunda and our hardworking employees for their commitment and effort in delivering a commendable result in spite of the challenging business environment. I must also at this juncture appreciate our parent company Diageo Plc for the continued support to our Company. I will also like to thank my fellow Board members for their dedication and commitment to the Company. Finally, I thank you my fellow shareholders for your continued support and for the confidence you have shown in the Board and management of Guinness Nigeria Plc. Thank you and I wish you a safe journey back to your various destinations.

Babatunde Savage, FCA
Chairman, Board of Directors
Guinness Nigeria PLC