NIGERIAN BREWERIES’ N599.1BN RIGHTS ISSUE
1. Rights Issue Announcement: Nigerian Breweries Plc is launching a N599.1bn rights issue to reduce its foreign exchange (forex) losses and ease local debt burdens. This was disclosed during the ‘Facts Behind the Rights Issue’ presentation by the company’s secretary, Uaboi Agbebaku, at the Nigerian Exchange Limited.
2. Purpose of the Rights Issue: The primary objective is to eliminate forex losses from the company's balance sheet and reduce the interest burden on local debts, especially with Nigeria's high monetary policy rate of 26%.
3. Structure of the Rights Issue: The company is offering 22.6 billion ordinary shares at 50 kobo each, priced at N26.50 per share. Shareholders will be allowed to purchase 11 new shares for every five shares they currently hold.
4. Use of Proceeds: The funds raised from the rights issue will be used to clear N328bn in forex debts and N263bn in local debt repayments. This move is expected to stabilize the company’s financial performance and reduce the strain of high interest rates.
5. Impact on Forex Losses: Nigerian Breweries has faced significant forex losses, notably a N153bn loss in 2023 due to naira devaluation. Clearing these debts is aimed at minimizing future forex risks.
6. Shareholder Concerns: Shareholders expressed concerns about the company's financial health and called for more investments in research and development, as well as strategies like backward integration to reduce reliance on imported raw materials.
7. Management's Optimism: Hans Essaadi, the Managing Director of Nigerian Breweries, acknowledged the challenges but expressed optimism about the company’s future, anticipating improved performance as inflation and interest rates stabilize. He also highlighted that Heineken, the parent company with a 67% equity stake, had suspended interest on its foreign loans to support the brewery.
8. Long-Term Commitment: Despite the economic pressures, Essaadi reiterated the company’s commitment to the Nigerian market, emphasizing that the rights issue is essential for stabilizing the company’s balance sheet and ensuring long-term growth.
9. Support from the Nigerian Exchange: Jude Chiemeka, CEO of the Nigeria Exchange Limited, praised Nigerian Breweries for its transparency and efforts to enhance operations, encouraging the company to leverage its listing for better access to capital and liquidity.
This detailed explanation highlights the company's strategy to address its financial challenges and its outlook for the future.
1. Rights Issue Announcement: Nigerian Breweries Plc is launching a N599.1bn rights issue to reduce its foreign exchange (forex) losses and ease local debt burdens. This was disclosed during the ‘Facts Behind the Rights Issue’ presentation by the company’s secretary, Uaboi Agbebaku, at the Nigerian Exchange Limited.
2. Purpose of the Rights Issue: The primary objective is to eliminate forex losses from the company's balance sheet and reduce the interest burden on local debts, especially with Nigeria's high monetary policy rate of 26%.
3. Structure of the Rights Issue: The company is offering 22.6 billion ordinary shares at 50 kobo each, priced at N26.50 per share. Shareholders will be allowed to purchase 11 new shares for every five shares they currently hold.
4. Use of Proceeds: The funds raised from the rights issue will be used to clear N328bn in forex debts and N263bn in local debt repayments. This move is expected to stabilize the company’s financial performance and reduce the strain of high interest rates.
5. Impact on Forex Losses: Nigerian Breweries has faced significant forex losses, notably a N153bn loss in 2023 due to naira devaluation. Clearing these debts is aimed at minimizing future forex risks.
6. Shareholder Concerns: Shareholders expressed concerns about the company's financial health and called for more investments in research and development, as well as strategies like backward integration to reduce reliance on imported raw materials.
7. Management's Optimism: Hans Essaadi, the Managing Director of Nigerian Breweries, acknowledged the challenges but expressed optimism about the company’s future, anticipating improved performance as inflation and interest rates stabilize. He also highlighted that Heineken, the parent company with a 67% equity stake, had suspended interest on its foreign loans to support the brewery.
8. Long-Term Commitment: Despite the economic pressures, Essaadi reiterated the company’s commitment to the Nigerian market, emphasizing that the rights issue is essential for stabilizing the company’s balance sheet and ensuring long-term growth.
9. Support from the Nigerian Exchange: Jude Chiemeka, CEO of the Nigeria Exchange Limited, praised Nigerian Breweries for its transparency and efforts to enhance operations, encouraging the company to leverage its listing for better access to capital and liquidity.
This detailed explanation highlights the company's strategy to address its financial challenges and its outlook for the future.