Nigerian Breweries PLC has received significant support from its parent company, Heineken, which disclosed that it has suspended interest payments on loans to the Nigerian subsidiary, as part of its ongoing financial restructuring efforts.
This was announced by the Managing Director, Hans Essaadi during the “Facts Behind the Rights Issue” event at the Nigerian Exchange (NGX) on September 17, 2024, according to Nairametrics.
This strategic decision comes as Nigerian Breweries seeks to stabilize its finances in the face of economic challenges, including inflation, foreign exchange losses, and increasing operational costs.
To further bolster its financial position, Nigerian Breweries plans to raise N599.1 billion through a rights issue, offering 22.6 billion ordinary shares at N26.50 per share to existing shareholders.
This capital raise, based on a ratio of 11 new shares for every 5 held as of July 12, 2024, aims to address local debt and reduce foreign exchange liabilities.
During the event, Nigerian Breweries’ company secretary, Mr. Uaboi Agbebaku, confirmed the N599.1 billion target and highlighted the importance of addressing the company’s foreign exchange liabilities to stabilize its profit and loss accounts.
He explained that the funds raised through the rights issue would not only help reduce bank debt but also lower interest costs, thereby alleviating financial pressure on the company.
Agbebaku attributed much of the recent financial strain on Nigerian Breweries to the devaluation of the naira and surging inflation, which have increased costs.
He noted that foreign exchange losses have had a significant impact on the company’s financial results, further complicating its recovery efforts.
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 aims to raise N599.1 billion to offset local debts and foreign exchange liabilities.
He added, “We are working to reduce our bank debt, which will ultimately lower our interest burden and ease financial pressure.”
Essaadi recognized the challenging macroeconomic climate but expressed confidence in the company’s future prospects.
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.
