Nigerian breweries targets N599bn through rights issue to strengthen balance sheet
By Esther Agbo
Nigerian Breweries Plc has announced plans to raise N599.1 billion through a rights issue, aimed at repairing its balance sheet and mitigating the effects of foreign exchange (FX) devaluation on its operations.
This was revealed during the company’s “Facts Behind the Rights Issue” presentation, held at the Nigerian Exchange Limited (NGX) on September 17, 2024, where top management, including CEO Nigeria Breweries PLC, Hans Essaadi and CFO Ben Wessels Boer, outlined the strategic rationale behind the fundraising initiative.
Speaking at the event, CEO, Essaadi emphasised the company’s strong market presence, robust production, and distribution capabilities, and its ongoing sustainability efforts.
Nigerian Breweries, which operates Africa’s largest brewery in Enugu and has expanded operations in Kaduna, seeks to balance profitability with its commitment to environmental and social responsibility.
Essaadi reiterated the company’s focus on green energy and community support.
He said, “We also want to be a leading company when it comes to sustainability and compliance making sure that we turn our business, longer term also in a green business, that we make sure that we give back to local communities where we can, and that in terms of electricity, in terms of energy, in terms of water, we try to limit our footprint as much as we possibly can.
“These are some pictures on the capacity extension and modernization, so this has happened both in the southeast, in Enugu state, now the largest brewery operation in Africa, and in Kaduna in the north, also to speak to the fact that we are a truly and maybe the only real true Nigerian business with further investments made in the northern part of Nigeria.”
Highlighting the company’s performance, the company’s CFO, Ben Wessels Boer detailed how Nigerian Breweries navigated the challenging Nigerian economic environment in the first half of 2024.
Despite the impact of devaluation, inflation, and decreased disposable income, the company managed to grow its revenue and improve productivity.
However, FX-related debt, exacerbated by the naira’s devaluation from N900 to N1,500 against the dollar, has put pressure on its net profit, necessitating the rights issue.
Wessels explained that the rights issue would be used to fully eliminate FX debt and reduce the company’s naira-denominated debt to sustainable levels.
This move is expected to shield Nigerian Breweries from further FX losses and reduce its interest burden, allowing the company to stabilise its financials.
He said, “Then if you look at the net profit, there you see the red dot, and that is very much linked to what we’ve seen in most Nigerian companies, because of the devaluation.
“We also had, because of the FX scarcity and FX debt on our balance sheet, and if we look at the first half of 2024, we saw that the Naira to the dollar devaluated from 900 end of 2023 to about 1500 end of June. So that’s resulted in a revaluation of our FX debt.
“We are growing our revenue, we have been able to relatively lower our fixed cost base as a percentage of revenue, so in that way we are on the right path. What we do need is a bit of stability.
“We want to fully eliminate the FX exposure on our balance sheet, and we have seen at Nigeria Breweries, but also at a lot of other companies, that if you have an FX exposure on your balance sheet, and there is devaluation, that has a massive impact on your net profit, so that is one thing we can fully eliminate with that rights issue, eliminate overdue FX debt, and at the same time we also want to lower our Naira debt to healthy levels, which we can sustain with our cash generation.”
Moreover, the Company Secretary at Nigeria Breweries, Uaboi Agbebaku further elaborated on the rationale behind the rights issue, noting that N328 billion of the funds would go towards repaying FX obligations, with the remainder allocated to local debt repayment. Agbebaku urged investors to support the initiative, citing Nigerian Breweries’ resilience since its founding in 1946.
“In terms of the allocation of funds, you could see that the repayment of excess FX obligation is about 328 billion, so that’s the huge FX debt we are carrying in our books. And that’s the first thing we want to do. And then what is left will go into repayment of local obligations.
“You see on a regular basis that FX loss is huge in a P&L, once we’re able to clear all these outstanding payables, then we will no longer be having that in a P&L accounting in our results. And we also want to reduce as much as possible local debt, local bank borrowing, Naira borrowing. And the impact of that also is that it will eventually reduce the interest burden that we’re carrying.
“We all know what interest rate today is, but it’s as at the last time, over 26 percent MPR. So these are the things we really want to sort out with our rights issue,” he stated.
The offer is open to shareholders as of July 12, 2024, with shares priced at a 10.8 percent discount. Shareholders will be able to purchase 11 new shares for every five they currently hold.
The new shares are expected to be listed on the Nigerian Exchange (NGX) by the third week of November.
However, the Chief Executive Officer of NGX, Jude Chiemeka in his address emphasised the brewery giant’s longstanding presence in the Nigerian market, having been listed since 1973.
He underscored the importance of transparency and engagement in the capital markets, particularly through platforms like the “Fact Behind the Figure” series, which allows companies to share financial performance, operational updates, and strategic plans.
According to him, Nigerian Breweries PLC, the pioneer and largest brewing company in Nigeria, was highlighted for its resilience in navigating economic challenges.
He said, “Incorporated in 1946 and listed on the Nigerian Exchange in 1973, the company boasts a current market capitalisation of 294 billion Naira, making it one of the largest companies in Nigeria by market value.
“In the face of ongoing economic challenges, NGX acknowledges the commendable efforts of the Nigerian Breweries PLC’s board and management, enhancing operations, promoting business continuity, and restoring investor confidence.”
