FINANCIAL ANALYSIS

COMPANY RATIOS
RATIO 2023 2022 2021
Profitability ratios:
Gross profit margin 34.1% 35.1% 28.5%
Operating profit 10.2% 11.6% 6.2%
margin
Net profit margin -7.9% 7.6% 0.8%
Return on Assets -7.5% 7.3% 0.7%
Return on Equity -20.2% 17.4% 1.7%
Liquidity ratios:
Current ratio 0.77:1 1.03:1 0.9:1
Quick ratio 0.57:1 0.73:1 0.6:1
Solvency ratios:
Debt to equity ratio 76.66% 58.27% 56.15%
Interest coverage 0.44 times 11.22 times 2.13 times
Historical
performance
Revenue growth 10.94% 28.93% 53.69%
Net income growth -216.08% 1146.78% 110%

INDUSTRY AVERAGES
RATIO 2023 2022 2021
Profitability ratios:
Gross profit margin 34.8% 30.2% 25.2%
Operating profit margin 8.9% 8.5% 5.2%
Net profit margin -10.1% 8.2% 1.2%
Return on Assets -4.8% 4.2% 1.4%
Return on Equity -6.8% 13.6% 10.2%
Liquidity ratios:
Current ratio 0.9:1 0.8:1 0.7:1
Quick ratio 0.65:1 0.53:1 0.42:1

COMMENTS:
Profitability ratios:
The gross profit margin of Guiness Nigeria plc showed a significant improvement from 2021 to 2022,
increasing from 28.5% to 35.1%. This indicates a notable enhancement in the company's ability to
manage production costs relative to its revenue, potentially due to higher sales prices, reduced costs
of goods sold, or improved operational efficiency.
In 2023, the gross profit margin slightly decreased to 34.1%, which, while still higher than 2021,
suggests a minor decline in cost management efficiency compared to 2022. This could be due to
various factors, such as increased production costs, changes in market conditions, or pricing
strategies.
The case is the same for the operating profit margin which showed a notable improvement from
2021 to 2022 and remained relatively stable in 2023, only experiencing a slight dip. Both the gross
profit margin and operating profit margin outperformed the industry average over the 3 year period,
which indicates a strong market position in the beverage industry.
The net profit posted a significant increase from 2021 to 2022. However, it experience a huge decline
from an increase of 7.6% in 2022 to a decline of 7.9% in 2023. Upon further investigation, this sharp
decline is attributed to a huge increase of 2401.6% in its finance costs as a result of increased loans
obtained.
Overall, the company demonstrated a strong improvement in profitability from 2021 to 2022,
maintaining a relatively high gross profit margin and operating profit margin in 2023 despite the
slight dip. The consistent performance in the past two years reflects the company's resilience and
ability to sustain a solid profit margin in a potentially challenging market environment. However, the
increase loans is a concern that needs to be controlled in order for it not to affect its liquidity
position.

Liquidity ratios:
In 2021, the current ratio was 0.9:1, indicating the company had slightly fewer current assets than
liabilities, suggesting a potential liquidity issue.
In 2022, the current ratio improved to 1.03:1, indicating a better liquidity position where the
company had more current assets than liabilities.
In 2023, the current ratio decreased significantly to 0.77:1, indicating a deterioration in liquidity and
that the company had considerably fewer current assets than liabilities.
In 2021, the quick ratio was 0.6:1, suggesting that the company had limited liquid assets to cover its
short-term liabilities.
In 2022, the quick ratio improved to 0.73:1, showing a better liquidity position but still below the
ideal level.
In 2023, the quick ratio dropped to 0.57:1, indicating a worsening liquidity position and increased
reliance on inventory to meet short-term obligations.
Overall, the liquidity position of Guiness Nigeria plc improved from 2021 to 2022, as reflected by the
increases in both current and quick ratios. However, there was a notable decline in both ratios in
2023, indicating a significant deterioration in the company's ability to meet its short-term obligations.
This trend suggests that the company may face challenges in managing its liquidity and could
struggle to pay its liabilities as they come due without improving its current asset management or
reducing its short-term liabilities.

Solvency ratios:
In 2021, the debt to equity ratio was 56.15%, indicating a moderate level of debt relative to equity.
In 2022, the ratio increased slightly to 58.27%, showing a marginal rise in debt usage.
In 2023, the ratio surged to 76.66%, indicating a significant increase in the company's reliance on
debt financing, which could pose higher financial risk.
The interest coverage ratio in 2021 was 2.13 times, suggesting the company could cover its interest
expenses slightly over twice with its earning. The ratio improved dramatically to 11.22 times,
indicating a strong ability to cover interest expenses and a significant improvement in earnings
relative to interest obligations. In 2023, the ratio plummeted to 0.44 times, indicating that the
company could not cover its interest expenses with its earnings, signaling severe financial distress
and potential insolvency risk.
Overall, the liquidity position of Guineas Nigeria plc improved from 2021 to 2022, as reflected by the
increases in both current and quick ratios. However, there was a notable decline in both ratios in
2023, indicating a significant deterioration in the company's ability to meet its short-term obligations.
This trend suggests that the company may face challenges in managing its liquidity and could
struggle to pay its liabilities as they come due without improving its current asset management or
reducing its short-term liabilities.