international brweries

The Board of Directors of International Breweries has finalised plans to raise capital for the firm through a rights issue. 

This was revealed in a notification sent to the Nigerian Stock Exchange (NSE). The approval is, however, subject to the approval of Shareholders and the Nigerian bourse. 

[READ MORE: Investors in Budweiser’s International Breweries wail as N163 billion is wiped out of market value] 

What you should know: The notification was given in accordance with Section 1.1 of the rules relating to Board Meetings. It is part of the obligations of listed companies to notify the NSE whenever any key decision is taken by the board, usually 24 hours after a relevant Board meeting. 

What this means: It is of common knowledge that a rights issue is a way for companies to raise capital. In this regard, capital is raised when existing shareholders pay for the new shares that are being issued.   

International Breweries may use the raised capital to acquire assets, make a take-over, repay debts or save itself from bankruptcy. Although a company can raise capital in other ways, such as borrowing from banks or issuing bonds, there can be times when the companies may be reluctant to seek credits from banks because of the high-interest rate incurred by loans. 

[ALSO READ: International Breweries appoints a new Non-Executive Director] 

A look into the company’s financial records: The Half-Year 2019 financial statement of International Breweries Plc revealed a surge in the company’s Loss After Tax which increased by 140.36% to N6.841 billion at the end of June this year, from the N2.846 billion declared in the half-year 2018. 

Ironically, the company’s revenue appreciated by 29.22% from N53.110 billion in June 2018 to N68.631 billion posted in the same period in 2019. Despite the improvement in the company’s turnover, other Key Performance Indicators (KPIs) followed the same negative trend. 

Deal book 300 x 250
Deal book 300 x 250

The Half-Year 2019 financial statement showed that Loss Before Tax (LBT) climbed as well by an enormous 101% when compared with the corresponding period of 2018. The LBT increased by a margin of N5.283 billion from N5.243 billion to N10.536 billion at the end of June 2018 and June 2019 respectively. 

The reasons for the loss: The steep decline in the bottom-line of International Breweries is due to three principal factors as the financial statement for the period under review disclosed. 

  • First, the company’s Cost of Sales rose by as much as N13.239 billion between 2018 and 2019. By implication, its cost of doing business increased greatly between the two periods without impacting its bottom-line positively. 
  • Similarly, Marketing and Promotion Expenses climbed up to N13.511 billion in June 2019, compared to the 2018 figure of N10.351 billion. 
  • Finally, Administrative Expenses went up from N7.802 billion at HY2018 to N12.994 billion in 2019. 

[READ FURTHER: Are spirits, bitters eroding the value of beer makers?

  

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