Key highlights
- The loan will ensure that there is no stoppage of production or any other disruption to the company’s operations.
- The interest rate and the tenor of the loan are better and more flexible than other alternative sources.
- The notion of further excise tax increases, including significant ones that are being rumored at this point in time would have a devastating effect on the company’s business.
Nigerian Breweries Plc has said that it will require shareholders’ approval for a €110 million inter-company loan at the Annual General Meeting to enable the company to settle its overdue payables.
The Managing Director/CEO, Mr. Hans Essaadi disclosed this at the company’s Pre-AGM press briefing in Lagos on Wednesday.
Trade payables
He noted that forex loss was a major impact on the company’s profitability in 2022.
- “Access to forex has continued to be an issue for Nigerian Breweries. The increase in our trade payables has been driven majorly by outstanding payments to our foreign trade partners as a result of the unavailability of enough forex at the official windows. The biggest hit trade partner is IBECOR, a Belgian company (also part of the Heineken group) that supports us in the sourcing and procurement of critical raw and packaging materials required for our operations. To enable us to settle the long overdue payables to IBECOR, Heineken International is ready to make available a €110 million loan to Nigerian Breweries. Being an inter-company loan and considering the amount involved, shareholders’ approval is required,” he said.
The rationale for the loan
Essaadi noted that the board has reviewed the rationale for, and the terms of the loan, adding that it will, amongst others, ensure that there is no stoppage of production or any other disruption to the company’s operations.
- “It is also a ready and cheaper source of the much-needed forex. The interest rate and the tenor of the loan are better and more flexible than other alternative sources, “he said.
Macroeconomic Indicators at Risk
Essaadi noted that the fundamentals of the Nigerian market are very positive with the benefit of an enabling environment.
He however stated that the country‘s macro-economic indicators, security, and infrastructure continue to remain at high risk.
- “Our first quarter of 2023 has been extremely difficult and we are not the only business that experienced the difficulties. We moved from FX scarcity to money scarcity. This is a fragmented market and what that means is that there are thousands of small outlets that operate with just cash and it is a known fact that Nigeria is an informal economy.
- This has been very tough for us but the good news is that we are slowly coming out of it but I am very cautious because of what we do not know in months to come, we are still yet to see the new government to be sworn in and so until then, we will be cautious.
- The good thing is that cash is slowly coming back into the economy and we are seeing our numbers improving and we were in dire need of that. We had to take a loan consideration which will go through the process of approval including the financing cost,” he said.
Taxation
Essaadi said that it is the firm’s belief that as a big partly alcoholic beverage and partly non-alcoholic beverage company, it would have to pay its duties and it respectfully wants to pay its duties and taxes in full.
He however noted that at the same time, the notion of further excise tax increases, including significant ones that are being rumored at this point in time would have a devastating effect on the company’s business.
- “We believe that especially at this moment in time, this is the wrong thing to do. We are in dialogue with the Government to pay fair amounts of tax without overdoing it because ultimately, excise tax increases significantly result in price increases in the market because it is indirectly a tax to consumers. This will lead to higher consumer prices on restricted disposable income which will also lead to less revenue. We are one of the businesses that are being confronted with this, but just to call this out that it is important for all of you to understand and for us to continue to have this constructive dialogue with the authorities that excise hikes at this point in time are the wrong thing to do, “he said.
What you should know
The Board of Directors of Nigerian Breweries Plc has declared a total dividend of N13.87 billion for its shareholders for the financial year ending 31st December 2022.
This was contained in the company’s corporate actions released to the NGX and obtained by Nairametrics.
The dividend which is subject to shareholders’ approval at the forthcoming Annual General Meeting (AGM), represents 143 kobos per ordinary share of 50 kobos each.
The statement signed by Uaboi G. Agbebaku, the Company Secretary noted the total dividend is comprised of an interim dividend of N3.288 billion, that is, 40 kobos per share which were declared in October 2022, and a final dividend of N10.584 billion, that is, 103 kobo per share.
For the full year 2022, net revenue grew by 26% to N550.838 billion in 2022 driven by brand mix improvements and strong pricing from N437.285 billion in 2021.
Cost of sales rose to 22% to N33.7.310 billion in 2022 from N276.872 billion in 2021 while profit after tax grew by 4% to N13.187 billion from N12.672 billion in 2021.
The company noted in the statement that the total market decreased by a high single digit reflecting pressure on consumer disposable income as well as naira devaluation and inflation.
