Nigerian Breweries PLC, in its ongoing financial restructuring, has received a crucial lifeline from its parent company, Heineken, which has suspended interest payments on loans to the Nigerian subsidiary.
This was disclosed by Managing Director Hans Essaadi during the company’s presentation at the Nigerian Exchange (NGX) “Facts Behind the Rights Issue” event on September 17, 2024.
The move is part of broader efforts by Nigerian Breweries to stabilize its finances amid a challenging economic environment, marked by inflation, foreign exchange losses, and rising operational costs.
Rights Issue of N599.1 Billion
Nigerian Breweries is set to raise N599.1 billion through a rights issue, offering 22.6 billion ordinary shares at N26.50 per share to existing shareholders.
The capital raise, on the basis of 11 new shares for every 5 held as of July 12, 2024, is aimed at addressing local debt and reducing foreign exchange liabilities.
During the event, Nigerian Breweries’ company secretary, Mr. Uaboi Agbebaku, confirmed the N599.1 billion target and emphasized that resolving the company’s FX liabilities is critical to stabilizing its profit and loss accounts.
He further explained that the funds raised would also help reduce the company’s bank debt, lowering interest costs and easing financial pressure.
Economic Impact and Financial Performance
Mr. Agbebaku attributed much of the company’s recent financial strain to the devaluation of the naira and surging inflation, which have driven up costs.
He stated that foreign exchange losses have significantly impacted Nigerian Breweries’ financial results.
Managing Director Hans Essaadi acknowledged the overall difficult operating environment.
He noted, “Our FX losses are substantial, and resolving these will stabilize our profit and loss accounts.”
He also confirmed that the company intends to raise N599.1 billion to offset local debts and FX liabilities.
On reducing local debt, he added, “We are working to reduce our bank debt, which will ultimately lower our interest burden and ease financial pressure.”
Mr. Hans Essaadi, acknowledged the tough macroeconomic climate but expressed confidence in the company’s future.
He noted that Nigerian Breweries has taken significant steps to future-proof its operations, adding, “Once inflation, interest rates, and other economic factors improve, we expect our results to reflect that.”
Essaadi also revealed that Heineken, the parent company holding a 67% stake in Nigerian Breweries, has suspended interest on loans to allow the company to focus on repaying local debts.
Despite these challenges, Nigerian Breweries reported impressive growth in revenue for the first half of 2024, reaching N479.7 billion, a 72.9% increase year-on-year.
However, this growth was overshadowed by rising operating costs, resulting in a 71.5% increase in pre-tax losses year-on-year.
The company’s total assets increased to N948 billion by mid-2024, up from N795 billion at the end of 2023, but current liabilities surged by 22%, reflecting the financial strain on the business.
Stock Market Performance
- Boosted by rising market activity, Nigerian Breweries is gradually recovering from a low of N20.52 per share, a decline that occurred in 2020 due to the pandemic’s impact.
- Although the stock surged to a high of N49.92 in 2022, it has since pulled back, trading below N30 in 2024.
- The company’s recent efforts to reduce debt and stabilize operations have positioned it for potential growth. These actions are expected to increase trading volumes and drive the stock into a correction phase, with a target toward the N50 technical level.
