Champion Breweries profit falls 34% despite 124% revenue surge
Champion Breweries' pre-tax profit fell 34.1% in the first half of 2026 as an explosive surge in finance costs offset a 124% revenue increase, leaving the stock down nearly 20% year-to-date.
Champion Breweries reported pre-tax profit of N2.28 billion for the first half of 2026, a 34.1% decline from N3.46 billion a year earlier. The drop occurred despite the Nigerian brewer more than doubling its top line to N35.73 billion, up 124.25% year-on-year.
The second quarter provided some operational recovery, generating N1.44 billion in pre-tax profit after a difficult first quarter that yielded a N1.07 billion loss. However, this Q2 figure still lagged the N1.72 billion profit posted in the second quarter of 2025.
While the revenue surge was impressive, cost of sales grew significantly faster, jumping 193.83% to N22.58 billion. This severe input cost pressure constrained gross margin expansion, limiting gross profit growth to 59.4% at N13.15 billion.
The primary catalyst for the bottom-line contraction was a dramatic escalation in borrowing expenses. Net finance costs rocketed 382.69% to N3.90 billion, driven by total finance costs of N4.91 billion compared to just N543.7 million in the prior year. This surge easily wiped out a 60% improvement in operating profit, which reached N6.17 billion.
On a reported basis, profit after tax actually rose 15.6% to N2.65 billion. However, this was entirely artificial, driven by a dramatically lower income tax expense of N368.88 million, down from N1.17 billion in the prior year. For equity investors, earnings per share fell 38.5% to 16 kobo.
Balance sheet expansion
Beneath the income statement volatility, the company executed a massive balance sheet restructuring. Total assets surged 151% to N130.80 billion, primarily driven by a staggering increase in property, plant and equipment to N101.70 billion from N19.75 billion at year-end 2025.
Management also shifted the capital structure, eliminating N29.39 billion in short-term borrowings while pushing total long-term debt up to N37.14 billion. Overall borrowings fell to N37.14 billion from N56.36 billion. Equity swelled to N69.08 billion from N13.08 billion, heavily supported by a N35.78 billion share premium and the recognition of N16.88 billion in non-controlling interest.
The aggressive capital expenditure and structural changes have impacted liquidity, with cash and equivalents falling 26.8% to N5.47 billion. The market has reacted coolly to the margin dilution, leaving the stock at N11.25 on July 23, reflecting a 19.64% year-to-date loss.
