NIGERIAN BREWERIES N600 BILLION RIGHTS ISSUE AND FX DEBT CHALLENGE: A DETAILED BREAKDOWN
The Nigerian Exchange Limited (NGX) recently approved Nigerian Breweries Plc's application to raise N600 billion through a rights issue. This issuance involves offering 22,607,491,232 ordinary shares of 50 kobo each at a price of N26.50 per share. The primary objective of this capital raise is to tackle the company's significant foreign exchange (FX) debt of N500 billion. Due to the ongoing dollar scarcity in Nigeria, Nigerian Breweries has been grappling with substantial FX losses, making this rights issue critical to stabilizing its finances.
Challenging Business Environment
Nigerian Breweries, like many other companies in the country, is navigating a challenging business landscape. Factors such as double-digit inflation, naira devaluation, and diminished consumer spending have impacted its operations. According to Hans Essaadi, the managing director and CEO of Nigerian Breweries Plc, the tough economic conditions have taken a toll on their business, compelling them to seek this substantial capital injection.
Details of the Rights Issue
Existing shareholders are being offered eleven (11) new ordinary shares for every five (5) ordinary shares they held as of July 12, 2024. Vetiva Advisory Services Limited and Stanbic IBTC Capital Limited are acting as issuing houses and financial advisers, while several stockbrokers, including Stanbic IBTC Stockbrokers Limited and Vetiva Securities Limited, are facilitating the process.
Financial Performance
The company has been facing financial difficulties, as reflected in its recent earnings. For the half-year ending June 30, 2024, Nigerian Breweries reported a loss after tax (LAT) of N85.199 billion, up from N47.599 billion in the same period in 2023—a 79% increase. Despite revenue growth of 72.9% to N479.767 billion in H1 2024, the company's net finance expenses soared by 60.5%, largely due to currency devaluation and inflation.
Heineken's Role
Heineken Plc, the majority shareholder of Nigerian Breweries, has committed to raising over 50% of the N600 billion target. The funds from the rights issue will primarily be used to settle overdue FX debts and other payables, helping to eliminate FX exposure, strengthen the company’s balance sheet, and return Nigerian Breweries to profitability.
In summary, Nigerian Breweries is taking strategic steps to overcome its financial challenges through this significant rights issue, which is essential for managing its FX debt and stabilizing its operations in a volatile economic environment.
The Nigerian Exchange Limited (NGX) recently approved Nigerian Breweries Plc's application to raise N600 billion through a rights issue. This issuance involves offering 22,607,491,232 ordinary shares of 50 kobo each at a price of N26.50 per share. The primary objective of this capital raise is to tackle the company's significant foreign exchange (FX) debt of N500 billion. Due to the ongoing dollar scarcity in Nigeria, Nigerian Breweries has been grappling with substantial FX losses, making this rights issue critical to stabilizing its finances.
Challenging Business Environment
Nigerian Breweries, like many other companies in the country, is navigating a challenging business landscape. Factors such as double-digit inflation, naira devaluation, and diminished consumer spending have impacted its operations. According to Hans Essaadi, the managing director and CEO of Nigerian Breweries Plc, the tough economic conditions have taken a toll on their business, compelling them to seek this substantial capital injection.
Details of the Rights Issue
Existing shareholders are being offered eleven (11) new ordinary shares for every five (5) ordinary shares they held as of July 12, 2024. Vetiva Advisory Services Limited and Stanbic IBTC Capital Limited are acting as issuing houses and financial advisers, while several stockbrokers, including Stanbic IBTC Stockbrokers Limited and Vetiva Securities Limited, are facilitating the process.
Financial Performance
The company has been facing financial difficulties, as reflected in its recent earnings. For the half-year ending June 30, 2024, Nigerian Breweries reported a loss after tax (LAT) of N85.199 billion, up from N47.599 billion in the same period in 2023—a 79% increase. Despite revenue growth of 72.9% to N479.767 billion in H1 2024, the company's net finance expenses soared by 60.5%, largely due to currency devaluation and inflation.
Heineken's Role
Heineken Plc, the majority shareholder of Nigerian Breweries, has committed to raising over 50% of the N600 billion target. The funds from the rights issue will primarily be used to settle overdue FX debts and other payables, helping to eliminate FX exposure, strengthen the company’s balance sheet, and return Nigerian Breweries to profitability.
In summary, Nigerian Breweries is taking strategic steps to overcome its financial challenges through this significant rights issue, which is essential for managing its FX debt and stabilizing its operations in a volatile economic environment.