Diageo, the parent company of Guinness Nigeria Plc has indicated that it is fully committed to its investment in the country and would take up its Rights in full in the N40 billion Rights Offer, which opened on Monday.

Diageo owns a 54 percent stake in Guinness Nigeria Plc, through Guinness Overseas Limited (46.4percent) and Atalantaf Limited (7.8percent); while other shareholders account for 45.7percent.

Guinness Nigeria Plc is currently in the market for a Rights Issue to raise about N39.70billion. At an issue price of N58 per share, the offer price is 12.25 percent discounted, from the N66.10 it closed last Friday July 21, 2017. The offer opened on Monday July 24, 2017 and will close on Wednesday August 30, 2017.

The Rights Issue is being undertaken to enable Guinness Nigeria optimise its capital structure by deleveraging its balance sheet, thereby reducing financing costs. The company’s loan obligations have led to significant increase in gearing ratio and net finance costs, thereby putting pressure on its cash flows.

Between 2015 and 2016, Guinness Nigeria Plc obtained loan facilities from various financial institutions. A loan was also obtained from Diageo in 2016 to manage foreign exchange (FX) related obligations of Guinness Nigeria Plc.

Nigeria’s beer market share by installed production capacity shows that Guinness Nigeria Plc accounts for 25 percent, following Nigerian Breweries, which accounts for 65 percent, and others (10percent). The total value of Nigeria’s alcoholic beverages market is estimated to be more than $2billion, with the domestic beer market generating revenue of around $1.4billion.

Guinness Nigeria had obtained loans to fund the Company’s working capital needs and to expand operations, Babatunde Savage, chairman, Guinness Nigeria Plc, said Tuesday, at the Facts Behind the Issue presentation on the Nigerian Stock Exchange.

He noted that the Rights Issue is part of the company’s long-term plans to continue to invest and return to profitability.

“We have been in Nigeria for 67 years, and while it has been challenging in recent times for many Nigerian businesses, we remain committed to this market, as evidenced by our decision to offer this Rights Issue. We are grateful for the support that we have received from our shareholders and various other stakeholders up to this point,” Savage told a cross section of stakeholders in the market, including shareholders, fund and portfolio managers, regulators, auditors, issuing houses and registrars.

Proceeds from the Rights, which Stanbic IBTC Capital Limited is acting as the Issuing House, will be applied towards the repayment of the company’s various outstanding loan obligations.
Details show that N19.19billion will be used to reduce obligations to financial institutions, while N19.57billion will be used for the repayment of a portion of the related party loans.

The company is offering a total of 684,494,631 ordinary shares of 50 kobo each, to existing shareholders in the ratio of five (5) new ordinary shares for every eleven (11) ordinary shares held by shareholders, whose names appeared on the register of members of the company at the close of business on Wednesday, 15 March, 2017.

Peter Ndegwa, Managing Director, Guinness Nigeria Plc, explained that the “This Rights Issue will allow the company to deliver on its strategic objectives and give all our shareholders a unique opportunity to increase their shareholding in the company. Our expectation is that funds raised will help mitigate the impact of increasing finance costs, optimise our balance sheet and improve the company’s financial flexibility.”

The share price of Guinness Nigeria Plc at N66.1 had reached a 52-week high of N100.80 and 52-week low of N59.51. With a market capitalisation of N99.539billion, the company’s shares outstanding, currently stand at 1.505billion units.

The company’s sales performance in recent years has fluctuated with the impact of a changing market and the impact of innovation. More recently, challenging macroeconomic conditions have slowed sales from its core brands.

Guinness is listed on the Beverages –Brewers/Distillers subsector of the Consumer Goods sector of the Nigerian Stock Exchange.
“Consumer Goods companies are set for significant recovery in 2017, benefitting from an all-round improvement in the state of the economy, comparable to the previous year. First-quarter (Q1) 2017 earnings already prove a testament to this, with most reported earnings in the sector beating analysts’ estimates”, according to Ifedayo Olowoporoku’s team of research analysts at Lagos-based Vetiva Capital Management.