• Company Blames Naira Devaluation
• Challenging Environment, Rise In Borrowing Cost
• Rights Issue Proceeds To Offset Foreign, Domestic Loans

The urgent need to recapitalise Nigeria’s Heineken arm- Nigerian Breweries Plc became more glaring on Wednesday as the company presented its unaudited financials for the nine-month ended September 30, 2024.

According to details of the result presented through the Nigerian Exchange (NGX), the company sank deeper in the mire, despite a 74% growth in sales revenue, owing to an unholy alliance of a skyward growth in cost of sales, net loss on foreign exchange transactions and finance costs.

NB Plc recorded a loss after tax of N149.5bn, up by N92.305bn or 161.39% from the N57.194bn reported in the corresponding period of last year, representing a loss per share of N14.55, compared to the previous N5.57 each.

Net revenue for the period grew by N309.07bn from the N401.801bn reported in the first nine months of 2023 to N710.871bn; while cost of sales soared to N500.959bn from N249.241bn; leaving gross profit for the period at N209.912bn, up by 36% from 152.56n in the corresponding period of last year.

A statement by Sade Morgan, the Corporate Affairs Director, blamed the slower growth in gross profit, compared to revenue during the period on the 99% surge in cost of goods sold, primarily influenced by currency devaluation and rise in input costs.

Other income stood at N3.397bn from N1.953bn; selling and distribution expenses grew to N143.1bn from N101.553bn; just as administrative expenses climbed from N25.055bn to N37.762bn.

A breakdown of expenses for the period showed that raw materials and consumables for the period amounted to N407.198bn from N177.752bn; advertising and sales expenses amounted to N54.114bn from N36.691bn; employee benefits increased from N44.164bn to N50.964bn; distribution costs amounted to N73.184bn, up from N44.855bn; among others.

Net release of expected credit loss on financial assets rose from N645.707m to N3.402bn; resulting in operating profit of N29.045bn, a marginal growth from N27.259bn.

Finance income rose to N483.502m, up from N292.564m; net loss on foreign exchange transactions ballooned to N160.484bn, a N73.657bn or 84.83 rise over the N86.826bn reported in the prior nine months. Finance costs equally leaped from N18.888bn to N72.043bn; following which net finance costs soared by N126.621bn, or 120.11% to N232.044bn. Other net finance expenses for the period amounted to N159bn from N87bn; while interest expenses on the next pension liability rose to N1.1bn from N976m.

Profit before tax, therefore closed the period at N202.999bn, from N78.163bn, representing a N124.836bn or 159.71% rise from the N78.163bn loss recorded in the same period of last year. Income tax. Net profit for the period, was however lower, due to the income tax rebate of N53.498bn granted to the company, from the previous N20.968bn.

The statement quoted the Managing Director/Chief Executive of Nigerian Breweries Plc, Hans Essaadi, as noting that despite the continued challenging operating landscape characterised by high inflation, currency devaluation and rising input costs, the company has demonstrated resilience, as seen in the results delivered for the period ended 30th September 2024.

The business, he noted, “has delivered growth in the face of the challenging operating environment. Revenue grew by 75% benefitting from strategic pricing, innovation and market recovery.”

He lamented that foreign exchange losses largely influenced the company’s increase in net loss due to the naira devaluation and high borrowing costs arising from higher interest rates, and expressed optimism that the funds raised through the rights issue will strengthen the company’s balance sheet and significantly reduce its FX exposure.

Also commenting, the Company Secretary/Legal Director, Uaboi Agbebaku, reaffirmed the company’s enduring commitment to Winning with Nigeria through people development, strategic innovation, operational efficiency, and community impact, adding that the board remains confident in its long-term strategy to deliver value to shareholders.

He expressed appreciation to the trade partners, customers and all stakeholders for their immense support during these challenging times.

Investdata News recalls that NB Plc recently concluded a rights issue to existing shareholders of N599.098bn by way of an offer of 22,607,491,232 ordinary shares of 50 kobo each at N26.50 per share. A total of 11 new ordinary shares were offered for every five held by existing share at of the July 12, 2024 qualification date.

According to the rights circular, N311.423bn or 52.69% of the net proceeds will be utilised for payment of foreign currency denominated obligations; while N279.575bn or 47.31% is earmarked for payment of local currency denominated obligations.

In his letter dated July 17, 2024 to shareholders of the company, the interim chairman, Sijbe Hiemstra, explained that the rights issue is part of a business recovery plan, including “a company-wide reorganization aimed at securing a resilient and sustainable future for its stakeholders.”

The plan, he explained, became necessary after “the company recorded a net loss of approximately N106bn in its Full-Year 2023 results, driven mainly by a foreign exchange loss of N153bn resulting from the devaluation of the Naira.”

The loss, he continued, “follows a combination of challenging economic factors ranging from heightened operational costs, continued pressure on consumer disposable income, escalating inflation rates, FX volatility, amongst others.

“Whilst market conditions remain challenging and economic headwinds persist,” he expressed the board’s confidence in the company’s “robust and prosperous future, with great opportunities to grow and the ability to continue to build long term value for all stakeholders.

“After careful deliberations, the Directors recommended that the Company should proceed with a rights issue to raise funds to deleverage its balance sheet and meet working capital requirements.

“The proceeds from the Rights Issue will help to reduce the increasing debt burden and attendant financing costs. In addition to this Rights Issue, the Business Recovery Plan will involve a review of the Company’s current organizational structure and size as agreed with the industry union, the temporary suspension of operations in two of our nine breweries, as well as an optimization of production capacity in the other seven breweries, some of which have witnessed significant capital investment in recent years,” he further explained.