Nigerian Breweries Plc Plans to Raise N600 Billion Capital Through Rights Issue

In a recent announcement, Nigerian Breweries Plc declared it would use a rights issue to raise up to N600 billion.

The decision to raise capital was made at Tuesday's Board of Directors meeting, according to a corporate notice filed with the Nigerian Exchange Limited on Wednesday and signed by its Company Secretary, Uaboi G. Agbebaku.

Part of the notice read, “The board resolved to recommend to shareholders at the next Annual General Meeting the raising of up to N600bn capital by way of Rights Issue, subject to regulatory approvals.

“Due to the negative impact of the naira's devaluation and the high cost of funds on the company’s capital structure, especially on its debts, the proceeds from the Rights Issue will help to reduce the huge debt burden arising, thereby leading to a healthier balance sheet.

“Coupled with ongoing cost savings and other operational efficiency efforts, the board is optimistic about steering the company back to the path of sustainable profitability in the near future.”

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The board also proposed raising the company's share capital to cover the new shares that will be issued under the rights issue. It is therefore seeking shareholders to approve this resolution at the company's next AGM later this month. 

Nigerian Breweries Plc also revealed in its audited results for the year ended December 2023 that the depreciation of the naira caused a foreign exchange loss of N153 billion.

The company's revenue increased 8.9% during the reviewed period, from N550.64 billion to N599.64 billion. The brewer experienced a loss of N106.31 billion at the end of 2022, down from a gain of N13.19 billion due to a notable 449.7% increase in net finance expense to N189.19 billion.

The NB board of directors expressed regret over the macroeconomic challenges but also stated that they were ready to draw on their many years of experience doing business in Nigeria to help them weather the current economic storm.

“In a difficult operating environment, the Board will ensure that the Company builds on its more than 77 years of experience operating in Nigeria to cope with current realities.

The board said, “The company will continue to be resilient and forward-thinking, leveraging our broad portfolio, strong supply chain footprint, and passionate workforce to drive long-term value creation for its shareholders and other stakeholders.”

Back Story

Nigerian Breweries Plc's 2023 performance and earnings report, which was just released, stated that this is the worst record in more than a decade. The Company explained that this resulted from the naira's unification and the spike in inflation, which raised production costs.

Various financial factors, including the cost of sales, operating expenses, and foreign exchange losses, impacted the Group's overall performance in the reviewed year. The Company reported slow revenue growth due to weak purchasing power.

However, 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 the N337.331 billion in 2022.

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

Nigerian Breweries CoS/Revenue in 2023 was 64.54% higher than in the corresponding year, which settled at 61.3% in 2022. The gross profit margin stood at 35.5% higher in 2023 than in the corresponding year, which settled at 38.59% in 2022.

Nigerian Breweries’s total operating expenses (OPEX) finished at  N171.13 billion in 2023, signifying an increase of 4.4% from N164 Billion reported in 2022.