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…to offset FX effect on balance sheet
The Managing Director, Nigerian Breweries Plc, Mr. Hans Essaadi has said that the beer giant will be approaching the capital market, to raise a total sum of N600 billion through Right Issue, to reposition the company on a growth trajectory.
Addressing the media community on Thursday at the company’s Pre-Annual General Meeting in lagos, the NB boss further disclosed that, just like other businesses in the domestic economy, the company has in the last three financial years face daunting operational challenges occasioned by the economic contraption in the country.
Mr. Essaadi said NB being a company with a track record of successes, was able to navigate the musky economic waters to stay operational, providing services and adding value the economy.
He said the Right Issue became necessary for the company as leeway way, to utilize the capital raised in paying off Company’s foreign denominated payables which have been exacerbated by the devaluation of the Naira, as well as reducing the huge local debt burden on the company.
According to him, “the debt burden, both foreign and local, has continued to have negative impact on the company’s profitability, and the board strongly believes that drastically reducing the debt burden through the capital that will be raised through the right issue will enable the company return to the path of net profitability as soon as possible.
“The 2023 results were impacted by the significant shifts in the business landscape with substantial impact on businesses and livelihood nationwide. These included the redesign of the Naira notes which resulted in cash shortages that severely hampered social and economic activities nationwide set the tone for a turbulent year. High double-digits inflation rates, removal of subsidy on premium motor spirit, devaluation of the Naira, and foreign exchange scarcity further exacerbated the already difficult environment for the populace and businesses.
According to him, “proceed from the capital raising will be channelled towards payment of all overdue FX debt and payables. Remaining proceeds will be used to reduce local Naira debt and strengthen balance sheet and liquidity position and improve Shareholders fund, adding that, its attendants benefits includes, elimination of FX exposure, and partly reduction of interest expenses; improved FOCF driven by reduction of interest expenses; return business to profitability as soon as possible driven by elimination of FX losses and lower interest expenses.
The MD who said that the company will not be paying dividends in the year under consideration, despite its good track records on return on investment, noted that, focus is now more on the company’s business recovery plan, engaging its asset for operational efficiency and financial stability.
Meanwhile, the company said it aims to acquire an 80 per cent stake in Distell Wines & Spirits Nigeria Limited by the end of the first half of the year.
The brewer disclosed that it would be shutting down two of its nine breweries in Nigeria as part of a company-wide reorganisation on its strategic recovery plan.
NB, which has been operating in the Nigerian market has been battling foreign exchange losses, as the country continues to struggle with dollar scarcity.
The firm said, “The tough business landscape characterised by double-digit inflation rates, naira devaluation, FX challenges and diminished consumer spend has taken its toll on many businesses, including ours.
“This is why we have taken the decision to further consolidate our business operations for efficient cost management and optimal use of our resources for future sustainable growth.”
“The final part of the transaction is being completed at the South African end with the expectation that the transaction would be completed in full in the second quarter of this year.
