Nigerian Breweries Plans N599bn Rights Issue To Mitigate FX Losses

Nigerian Breweries Plc has revealed plans to reduce its foreign exchange losses through a N599.1 billion rights issue. The company’s Secretary, Uaboi Agbebaku, announced this during the ‘Facts Behind the Rights Issue’ presentation at the Nigerian Exchange Limited on Tuesday.

Agbebaku stated that the rights issue is intended to eliminate forex losses from the company’s balance sheet and reduce its interest burden on local debts in light of Nigeria’s 26 percent 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.

Reports revealed that Nigerian Breweries suffered a N153bn forex loss in 2023 due to the devaluation of the naira.

 At the presentation, shareholders voiced concerns about the company’s financial health and urged management to adopt forward-looking strategies to mitigate future foreign exchange risks.

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

Hans Essaadi, the Managing Director of Nigerian Breweries, acknowledged the challenging 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. 

 Jude Chiemeka, the Chief Executive Officer of the Nigerian Exchange Limited, in his remarks, praised Nigerian Breweries for using the platform to showcase its financial performance and strategic plans.

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

Chiemeka urged the company to continue taking advantage of the benefits of being listed on the exchange, such as better access to capital, a higher global profile, and increased liquidity.

This article was written by Tamaraebiju Jide, a student at Elizade University