NIGERIA – Nigerian Breweries Plc has announced plans to raise N599.1 billion (US$365.3M) through a rights issue on the Nigerian Exchange Limited (NGX) to alleviate its growing financial challenges.
The company is offering 22.6 billion ordinary shares at 50 kobo (US$0.75) each, priced at N26.50 (US$0.016) per share, allowing shareholders to purchase 11 new shares for every five they currently hold.
Uaboi Agbebaku, Company Secretary, explained that the funds will be directed towards clearing the company’s outstanding payables, including N328 billion in foreign exchange (FX) debts and N263 billion in local obligations.
Agbebaku emphasized that the move is essential to eliminate FX losses from the company’s balance sheet and reduce the interest burden on local debts, especially in light of Nigeria’s current 26 percent Monetary Policy Rate (MPR).
“Our FX losses are substantial, and clearing these obligations will stabilize our profit and loss accounts. Additionally, by reducing local bank debts, we expect to ease the significant financial strain caused by high interest rates,” Agbebaku stated.
Nigerian Breweries has been navigating a challenging financial landscape, reporting a loss after tax of N85.3 billion (US$52M) for the first half of 2024.
Rising inflation, escalating FX costs, and broader economic challenges have severely impacted the company’s profitability.
Shareholders have urged the company to explore forward-looking strategies to mitigate future FX risks. Recommendations included backward integration and increased investment in Research and Development (R&D) to reduce dependency on imported raw materials.
Managing Director Hans Essaadi acknowledged these concerns stating: “We have future-proofed our business. While some measures taken by the new administration are painful, we believe positive outcomes will emerge in the mid-to-long term as inflation and interest rates improve.”
Heineken, the parent company holding over 67 percent equity in Nigerian Breweries, has suspended the interest on its foreign loan to help alleviate the financial burden.
Essaadi reiterated Nigerian Breweries’ long-term commitment, saying, “We have weathered many storms in nearly 80 years of operation. This rights issue is crucial to stabilizing our balance sheet and ensuring sustained growth.”
In addition, the company has expanded its portfolio with the acquisition of Distell Nigeria, marking its entry into the wine, spirits, and ready-to-drink segments, a move expected to enhance profitability and secure its presence in the Nigerian market.
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