Layoffs Hit as Nigerian Breweries Plc Moves to Shut down Two Plants

Nigerian Breweries, one of the biggest beer manufacturers, announced on Tuesday in its recent note to the Nigerian Exchange Limited that it will proceed to restructure its entire business in response to some operational and financial challenges.

Nigerian Breweries has listed several operational issues, including a record foreign exchange loss from the previous year, which has forced the firm to close two of its nine plants.

The company stated that it must make a difficult decision to reposition Heineken Brouwerijen B.V.'s Nigerian subsidiary for a sustainable future that benefits stakeholders.

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Nigerian Breweries suffered its biggest loss after taxes last year since starting operations in Nigeria over 77 years ago. This was due to a net loss on foreign exchange transactions totaling N153.3 billion.

The company said the 2023 net loss of N106.3 billion resulted from “a combination of challenging economic factors ranging from heightened operational costs, continued pressure on consumer disposable income, escalating inflation rates, and FX volatility, amongst others.”

The document states that labour organisations, including the Food Beverage and Tobacco Senior Staff Association and the National Union of Food, Beverage, and Tobacco Employees, have been informed of the decision to temporarily stop operations at the two plants.

Job cuts are a strong possibility among the “operational efficiency measures” the company will adopt in the days ahead. According to the Premium Times report, talks with the two unions have already focused on the implications of that move.

“We recognize and regret the impact that the suspension of brewery operations in the two affected locations may have on our employees,” said Hans Essaadi, the company's managing director.

“We are committed to limiting the impact on people as far as possible and providing strong support and severance packages to all affected.”

A report states that a rights issue is under consideration to raise fresh capital that could help restore the cash-strapped brewer's life. This would enable the management to source cash from current shareholders in exchange for new shares. Attention will shift to the remaining seven manufacturing plants to put their production capacity to greater use.

This year, Nigerian Breweries expanded into the wines and spirits market by acquiring four-fifths of the ownership of Lagos-based Distell Wines and Spirits Limited.

Back Story

Nigerian Breweries recorded its highest revenue in the 2023 financial year, following high pricing for some of its products. The Company generated N599.64 billion in revenue in 2023, representing a 9% increase from the corresponding year, which settled at N550.64 billion in 2022. It was reported that 2022 signifies a 26% increase in revenue from N437.29 billion in 2021.

The company's revenue in Nigeria in 2023 stood at N599.31 billion from N550.43 billion in export revenue, from N210.53 million in 2022 to N335.47 million reported in 2023.

In 2023, Nigerian Breweries' cost of sales (CoS) rose to N387.03 billion, 15% of N337.331 billion in 2022.

The interchange between revenue and cost of sales led to a gross profit of N212.61 billion in 2023, an increase of 0.06% from the N212.48 billion reported in 2022.

As of this report, Nigerian Breweries Plc's price share is currently N28.05.