NIGERIA – Nigerian Breweries has announced the launch of series 5 & 6 commercial paper as part of the brewer’s plan to raise N45billion (US$123m) to support the company’s short-term funding needs.
A Commercial Paper (CP) is an unsecured, short-term debt instrument issued by a corporation, typically for the financing of accounts payable, inventories and meeting short-term liabilities.
They are backed only by a promise from the issuing bank or company to pay the fixed amount stated on the document at maturity.
The Series 5 would be for a tenor of 180 days, Series 6 would be for 270 days.
Following a successful run of the company’s first N100billion (US$273.7m) CP program which ran from 2015-2018 the board approved a new programme in July 2018. The first CP helped the company to reduce its overall funding costs.
This new CP program would run for three years till March 2022.
According to the management, this new CP program would support the cost management initiatives of the company, complement traditional sources of financing to include non-bank financing options and provide opportunity for non-equity investors to invest in the company.
The CP’s will, after issuance, be listed on the FMDQ OTC Securities Exchange, making it possible for investors to trade in them.
Analysis of the company’s recently released nine-month result for the period ended 30th September showed that gross revenue increased 2.7percent year-on-year this was however affected by higher excise duty expense compared to last year.
The new excise duty which came into effect on 4th June 2018 to help boost the federal government coffers-imposed excise duty on beer and stout at .30 kobo per centilitre in 2018 and .35 kobo per cl each in 2019 and 2020. This translates to N30 per litre of beer in 2018 and N35 per litre in 2019 and 2020 respectively
During the period, operating expenses spiked 6.1percent, marketing, and distribution expenses also increased 14.3percent as the competition among other brands become more intense.
The net finance cost stood at N2.9billion (US$7.9m) 141.5percent higher year-on-year, a 140.2percent year-on-year increase in finance costs outweighed a 59.7percent rise in finance income.