Nigerian Breweries to cut FX losses with N599bn rights issue

Nigerian Breweries Plc has announced plans to reduce its foreign exchange losses through a N599.1bn rights issue.

This was disclosed by the company Secretary, Uaboi Agbebaku, at the ‘Facts Behind the Rights Issue’ presentation by the Nigerian Breweries at the Nigerian Exchange Limited on Tuesday.

Agbebaku emphasised that the rights issue was aimed at eliminating forex losses from the company’s balance sheet and reducing its interest burden on local debts amid Nigeria’s 26 per cent monetary policy rate.

The company is offering 22.6bn ordinary shares at 50 kobo each, at N26.50 per share, allowing shareholders to purchase 11 new shares for every five they currently hold.

He explained that the proceeds would be used to settle the company’s payables, including N328bn in forex debts and N263bn in local debt repayments.

“Our FX losses are substantial, and clearing these obligations will stabilise our profit and loss accounts. We are also working to reduce local bank debts. The impact of that is that it will eventually reduce the interest burden that we are carrying, which has been a significant financial strain,” he said.

The PUNCH reports that Nigerian Breweries suffered a N153bn forex loss in 2023 due to the devaluation of the naira.

Shareholders at the presentation expressed concerns about the company’s financial health and urged the management to adopt forward-looking strategies to mitigate future FX risks.

They called for increased investments in research and development, as well as backward integration, to reduce reliance on imported raw materials.

The Managing Director of Nigerian Breweries, Hans Essaadi, acknowledged the difficult environment but expressed optimism about the company’s future.

“We have completely future-proofed our business. Some measures taken by the new administration are painful, but we believe that in the mid-to-long term, we will start to see positive outcomes. As inflation, interest rates, and other economic indicators improve, our results will follow suit,” he enthused.

Essaadi also revealed that Heineken, the brewer’s parent company, which holds over 67 per cent of Nigerian Breweries’ equity, had suspended interest on its foreign loans to enable the company to meet its financial obligations.

Despite the economic pressures, Essaadi reiterated the company’s long-term commitment to the Nigerian market.

“We have been in this market for nearly 80 years and have weathered many storms. This rights issue is essential for stabilising our balance sheet and ensuring long-term growth,” he added.

He also highlighted the company’s recent acquisition of Distell Nigeria, marking its entry into the wine, spirits, and ready-to-drink segments, which was expected to boost profitability and strengthen Nigerian Breweries’ presence in the Nigerian market.

In his remarks, the Chief Executive Officer of the Nigeria Exchange Limited, Jude Chiemeka, commended Nigerian Breweries for using the platform to present its financial performance and strategic plans.

He praised the company’s board and management for their efforts to enhance operations and restore investor confidence during challenging times.

Chiemeka encouraged the company to continue leveraging the benefits of listing on the exchange, such as improved access to capital, increased global profile, and access to liquidity.