Fresh issues market promises to be a very tough one in the coming months with the latest notification by the board of Nigerian Breweries Plc of plans to raise N600 billion by way of a Rights Issue to existing shareholders, subject to regulatory approval.
In a notice on the Nigerian Exchange Limited portal, the NB Plc plans to recommend the fresh capital to shareholders at the next Annual General Meeting scheduled for April 26, 2024, as part of mitigating what it called “the negative impact of the devaluation of the Naira and the high cost of funds on the company’s capital structure.
In the notice signed by Uaboi G. Agbebaku, the Company Secretary, Nigeria’s oldest brewer said proceeds of the fresh capital injection is also to help “reduce the huge debt burden arising thereby leading to a healthier balance sheet.”
This, it said, is “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.”
The company said in a statement to newsmen also on Wednesday that the move is in the aftermath of its a net loss of about N106 billion in its 2023 full year results due to “a combination of challenging economic factors ranging from heightened operational costs, continued pressure on consumer disposable income, escalating inflation rates, FX volatility, and high cost of debts, amongst others.”\
Similarly, the board also resolved to recommend to shareholders at the AGM, the increase in share capital to take care of the rights issue shares.
NB Plc will be going to the capital market at a time the nation’s banks will be seeking fresh capital injection to shore up their capital and meet the new minimum capital requirement announced by Central Bank of Nigeria (CBN) last weekend.
As part of the special business at the AGM of NB Plc, the directors propose “that shares not taken up by existing shareholders within the period stipulated under the Rights Issue may be offered to shareholders of the company that have indicated interest in purchasing additional shares not taken up by the shareholders entitled to do so in the Rights Issue, on such terms and conditions as may be determined by the Directors, subject to complying with relevant regulatory requirements.”
The proposed rights issue is part of measures “to restore the company’s balance sheet to a healthy position following the net finance expenses of N189 billion recorded in 2023 driven mainly by a foreign exchange loss of N153 billion resulting from the devaluation of the Naira.
With this an other ongoing cost-saving initiatives and operational efficiencies, the statement expressed the board’s optimism about steering the company back towards sustainable profitability in the near future.
The statement quoted NB’s Managing Director/CEO, Hans Essaadi as describing the Rights Issue as the first of its actions in its strategic recovery plan for business continuity and future growth, in the face of a persistently challenging operating environment.
According to him, “despite taking significant mitigating actions, the recent acceleration of the devaluation of the Naira, the lack of access to hard currency, and high interest rates has led to significant pressure on the net profit of Nigerian Breweries. This is not sustainable and now is the appropriate time to repair the balance sheet by using the proceeds of the rights issue to reduce the company’s debt”.
“This Rights Issue will allow Nigerian Breweries to deliver on its strategic objectives in line with our recovery plan, and give all our shareholders a unique opportunity to increase the number of shares they hold,” he added.
Essaadi also stressed that this process is part of the company’s recovery plan to sustain value for its stakeholders and return the business to profitability, and that “we have been here in Nigeria for more than 77 years and, while it has been challenging in recent times for many Nigerian businesses, we believe in the long-term growth of the Nigerian market as evidenced by our decision to offer this Rights Issue.
“We remain wholly committed to having a positive impact on our host communities and our consumers; leveraging our strong supply chain footprint; excellent execution of our route to market strategy; and our rich portfolio of longstanding and innovative beverage brands across the Lager, Stout, Non-Alcoholic Malt, Soft drinks, and Energy drinks categories, catering to the varied preferences of our esteemed consumers”, he added.
