Raya Brewery S.C., one of the late entrants to Ethiopia’s market, sustained loss close to 104 million Birr in the past fiscal year. The company’s annual report was released during the shareholders meeting held on Saturday, December 10, 2016.
“We lost almost 30 percent of our paid up capital,” Berhanu Getaneh, shareholder of Raya, explained. “I don’t expect to get a dividend next year. But I believe in the company and I think we have a hope.”
This is the second time in a row that Raya has sustained loss since it commenced operations in 2015. In its first year the company reported a loss of 71.9 million Birr before deferred tax. According to Fortune, this accounting year the figure stands at 64.8 million Birr.
Commenting on the loss, Alazar Ahmed, manager at a marketing agency and consults in the brewery industry, said “If you look into the giant brewery companies owned by multinationals, you can see the same trend”.
“The difference is, multinationals get funds from their parent company.” It would not be possible to report a profit at this point in the company’s story, Alazar said.
Nonetheless, Raya has improved its gross sales by more than three-fold. It has reached half a billion Birr in the last fiscal year. This has come at the expense of increasing cost of sales by 200 percent – reaching 293 million Birr. 24 percent of the gross sales is attributable to expansion in selling and distribution.
On the other hand, the general and administration expenses of Raya declined by 17 percent and stood at 37 million Birr by the end of last fiscal year. Gross margins also improved during the period.
The annual financial report of the company also shows that Raya is under increasing financing cost of 90 million Birr. During the year previous to the last one, the company’s financing cost stood at 21 million Birr.
Total long-term bank loans has also increased during the period by 15 percent and reached 815.14 million Birr. The company’s total assets, on the other hand, increased by 5 percent and reached 16 billion Birr. Out of this, 1.3 billion Birr was invested in property, equipment and leasehold land.
51 percent of the company’s total assets are financed by long term loans, while 27 percent of it is covered by equities. The rest is covered by current liabilities.
Raya’s cash flow for the fiscal year was 75.46 million Birr. This was attributable to losses, increased inventory and payment of creditors. it has also spent 98.19 million Birr for fixed assets acquisition. These expenses were covered from net bank loans of 175 million Birr.
Raya’s total debt to equity ratio has increased from 1.83 to 2.68. Long term loan to equity ratio has also increased to 1.87 from 1.31. This might be attributable to massive losses and expansion in bank loans and current liabilities.
Liquidity ratio shows the company’s current ratio stands at 1 from 0.95.
Source: Fortune
