NIGERIA – International Breweries Plc, the Nigerian subsidiary of Anheuser-Busch InBev has notified the Nigerian Stock Exchange (NSE) of its intention to seek a “Rights Issue” as a form of capital raising for the company, reports Beverage Industry News.
A rights issue is an issue of shares offered at a special discounted price by a company to its existing shareholders in proportion to their holding of old shares.
The move comes as International Breweries has seen its debt grow as it mounts a challenge to break the dominance of the Nigerian beer market by Heineken controlled Nigerian Breweries Plc and Guinness Nigeria Plc, a subsidiary of Diageo Plc.
Despite experiencing strong revenue growth with the expansion of its capacity, the growth has come at a cost.
The company recorded a net loss of N4bn (US$11m) in 2018 and the losses have continued into the first half of 2019, recording N6.8bn (US$18.86m) in net loss.
According to a recent report by Nairametrics, a web-based financial resource and literacy company, “for every N100 in sales, the breweries spends N69 as direct cost. And out of the balance of N31, it spends another N15 on marketing and promotion, as well as N20 on operating expenses, leaving it with an operational loss.
Coupled with a humongous N225 billion loans (US$ 642m), the company does not generate enough revenues to pay for it.
IB Plc has not disclosed how much it is seeking to raise though it did say that “the Board approval of the aforementioned is however subject to Shareholders and Regulatory approvals in the prescribed form.”
The Nigeria Stock Exchange listed firm has been ramping up its capacity in the country. It merged its three breweries (Intafact Beverages Ltd, Pabod Breweries and Int’l Breweries) into one entity.
Some of its brands include Hero Lager, Trophy Lager, Beta Malt, Grand Malt and Budweiser among others.