Nigerian Breweries turns to Heineken to clear heavy foreign exchange overdue

Nigerian Breweries is clinging to the promise by Amsterdam-based Heineken to fully take its allotment from its ongoing share offering to shareholders.

The proceeds of the offering will go into clearing the foreign currency overdue that turned its shareholders’ fund into red in the first half of the year after liabilities overtook assets.

Heineken NV, the parent company of the manufacturer, holds a 56.7 per cent in the entity, making it its majority owner.

Overdue loans and borrowings stood at N348.9 billion, while trade and other payables, dominated by past due obligations to overseas trade partners, climbed to N341.5 billion at the end of June, easing the slide of its net asset position to the negative territory.

“Heineken will take its full rights,” Nigerian Breweries told PREMIUM TIMES on Thursday via email. “Engagement concluded on this,” it added.

The brewer is asking shareholders to buy 22.6 billion to be issued to them in proportion to their stakes in the company at N26.5 per unit, a 6.4 per cent discount to the opening market price on Monday, when the offer launched to help raise about N600 billion for various purposes.

Part of the cash is to help cut its local loan exposure of N550 billion. “This will lead to reduced interest burden, lower leverage ratios, and strengthened balance sheet,” it stated.

The road has been rough for Nigeria’s foremost beer maker in recent years, following a prolonged foreign exchange scarcity that squeezed operations two years ago and a sharp depreciation in the value of the local currency naira, which caused the company to report a loss for the first time in at least ten years in 2023.

A slump of nearly 72 per cent in the value of the naira compared to the dollar between last June and now, during which monetary authorities in Nigeria twice weakened the currency to attract foreign inflows, continues to weigh on the finances of companies like Nigerian Breweries, which relies on imported goods for the bulk of its raw materials.

Multinationals like Nestle, PZ Cussons and Friesland Campina are also battling foreign exchange-related losses as the consumer goods industry, where an ever-expanding range of products is making pricing increasingly competitive, faces a decades-high inflation that is eroding profit margin for businesses.

To further cope with the downturn, Nigerian Breweries has had to take the tough measure of shutting down two of its plants as part of a company-wide reorganisation, hoping to return them to life when the tide turns.

This June, the company announced its acquisition of an 80 per cent controlling stake in Distell Wines and Spirits Nigeria Limited, adding spirits, wines and flavoured liquors to its product mix.