Nigerian Breweries Seeks to Cut FX Losses with N599bn Rights Issue

Nigerian Breweries Plc has announced plans to tackle its foreign exchange losses through a N599.1 billion rights issue, as part of its strategy to improve financial stability. The company’s secretary, Uaboi Agbebaku, made the disclosure during the “Facts Behind the Rights Issue” presentation at the Nigerian Exchange Limited on Tuesday.

Agbebaku highlighted that the rights issue aims to wipe out the company’s significant forex losses and lessen its interest liabilities on local debts, which have been exacerbated by Nigeria’s high 26 per cent monetary policy rate.

The brewery giant is offering 22.6 billion ordinary shares at 50 kobo each, priced at N26.50 per share. Shareholders can acquire 11 new shares for every five they already hold, a move designed to raise capital for settling key debts, including N328 billion in forex liabilities and N263 billion in local debt repayments.

“Our foreign exchange losses have been considerable. By clearing these obligations, we aim to stabilise our profit and loss accounts. Reducing local debt will also ease the significant interest burden we’ve been carrying,” Agbebaku explained.

Nigerian Breweries reported a forex loss of N153 billion in 2023, driven by the naira’s devaluation. During the presentation, concerned shareholders urged the company to adopt strategies that would protect against future currency risks. They advocated for increased investment in research, development, and backward integration to reduce dependency on imported materials.

Managing Director Hans Essaadi acknowledged the company’s struggles but expressed confidence in its long-term outlook. “We have future-proofed our business,” he said. “While some of the recent policy changes by the government have been difficult, we believe they will yield positive results in the medium-to-long term. As inflation and interest rates improve, our financial performance will follow suit.”

Essaadi also revealed that Heineken, the parent company which holds over 67 per cent of Nigerian Breweries’ equity, had suspended interest on its foreign loans to assist the brewery in meeting its financial obligations. Despite the current economic headwinds, he reaffirmed Nigerian Breweries’ commitment to the Nigerian market, stating, “We’ve been in this market for nearly 80 years, weathering many storms. This rights issue is critical to stabilising our balance sheet and ensuring future growth.”

Jude Chiemeka, Chief Executive Officer of the Nigerian Exchange Limited, praised Nigerian Breweries for its transparency in presenting its financial performance and strategic roadmap. He lauded the company’s management for its efforts to bolster operations and restore investor confidence during a challenging economic period.

Chiemeka also encouraged the company to continue utilising the benefits of its listing on the exchange, including improved access to capital and liquidity, as well as an enhanced global profile.