Nigerian Breweries eyes N600bn rights issue to boost capital

Joy Agwunobi 

Nigerian Breweries Plc, one of the leading companies in the Nigerian brewing industry, is planning to raise up to N600 billion through rights issues. The move, which is intended to tackle the negative impacts of the devaluation of the Naira and high borrowing costs on the company’s financial health, comes as the brewery firm seeks to maintain its competitiveness and  dominance in the Nigerian market.

The details of the planned rights issue were disclosed in a recent notice issued by Nigerian Breweries Plc to the Nigerian Exchange Limited (NGX). The notice was signed by Uaboi G. Agbebaku, the company’s Secretary, and provided information on the rationale behind the decision and the proposed structure of the rights issue.

According to the notice, the proceeds from the rights issue will be used to reduce the company’s debt burden, resulting in a healthier balance sheet and a stronger financial position.

Shareholders will have the opportunity to vote on the proposed rights issue at the company’s upcoming annual general meeting (AGM) on April 26, 2024.

The notice read in part “This is to inform the investing public that at a specially convened meeting of the Board of Directors of the Company held on the 2nd of April 2024, the Board resolved to recommend to shareholders at the next Annual General Meeting (AGM), the raising of up to N600 billion capital by way of Rights Issue, subject to regulatory approvals.”

“Due to the negative impact of the devaluation of the naira and the high cost of funds on the Company’s capital structure, especially on the Company’s debts, the proceeds from the Rights Issue will help to reduce the huge debt burden arising thereby leading to a healthier balance sheet. 

“Coupled with ongoing cost savings and other operational efficiency efforts, the Board is optimistic about steering the Company back to the path of sustainable profitability in the near future.

“The Board also resolved to recommend to shareholders at the AGM scheduled for the 26th of April 2024, the increase in the Company’s share capital to take care of the new shares to be allotted under the Rights Issue.”

In a statement, Hans Essaadi, the managing director/chief executive officer of Nigerian Breweries Plc, described the rights issue as a critical step in the company’s strategic plan for recovery and future growth. 

Essaadi also said that the recent acceleration of the devaluation of the naira, as well as the limited 

access to hard currency and high-interest rates, have put significant pressure on the company’s 

net profit. He noted that these pressures are not sustainable in the long term and that the

 company needs to take steps to address them. 

According to Essaadi, the rights issue will allow the company to achieve its strategic goals, as outlined in its recovery plan. This plan, he said, is designed to create value for the company’s stakeholders and return the business to profitability. 

“This process is part of the company’s recovery plan to sustain value for its stakeholders and return the business to profitability,” he said. 

Nigerian Breweries’ recent financial report, reflected a company in a tough financial position, having recorded a net loss of N106.3 billion for the year 2023. This is a sharp contrast to the net profit of N13.2 billion that was reported for the year 2022.

The company highlighted that its net loss on foreign exchange transactions increased to N153.33 billion in 2023 from N26.34 billion in 2022. This was largely due to higher foreign exchange losses as a result of its exposure to foreign currency-denominated payables. 

Nigerian Breweries’ equity multiplier of 12.58, which is a measure of the company’s financial leverage, shows that it relies heavily on debt financing. This, according to analysts, could be a cause for concern, given that the company’s current liabilities are also high at N584.5 billion.