September 17, 2024
By Chukwuma Kelechi InvestAdvocate
Lagos (INVESTADVOCATE)-Hans Essaadi, the Managing Director and Chief Executive Officer of Nigerian Breweries Plc, has attributed the company’s staggering N328 billion debt to the foreign exchange fluctuations resulting from the instability of Nigeria’s business environment.
He emphasized the challenges this volatility has posed for the company, making future forecasts increasingly difficult.
Speaking at the “Facts Behind the Figures” presentation at the Nigerian Exchange (NGX) on Tuesday, Mr. Essaadi explained that the significant debt burden is a direct consequence of the Naira’s sharp devaluation in the 2023 fiscal year.
He noted that over the past three years, the operating environment has been characterized by an unprecedented level of unpredictability, complicating business planning and projections.
Despite these challenges, Essaadi expressed optimism about Nigeria’s long-term potential, asserting that the nation possesses the capacity for unexpected and rapid recovery.
Mr. Essaadi, along with senior executives from Nigerian Breweries, were at the NGX to rally shareholder support for the company’s rights issue.
The company aims to raise N599.9 billion through the issuance of 22.6 billion ordinary shares at 50 kobo each. These shares will be offered at a price of N26.50 per share, with existing shareholders eligible to receive 11 new shares for every 5 held as of July 12, 2024.
The company’s Finance Director elaborated on the rationale for this capital raise, stating that a significant portion of the N599.9 billion will be allocated toward extinguishing the N328 billion debt, which comprises both foreign exchange liabilities and domestic debt with substantial interest obligations. Reducing the debt burden, he explained, would enable the company to restore profitability and reduce the significant interest payments currently owed to local financial institutions.
Addressing inquiries from stockbrokers about the company’s future profitability, Essaadi remarked, “We wish we had a crystal ball to predict Nigeria’s business climate, but we remain poised for growth. There are promising signs from the new administration’s economic reforms, including reductions in inflation and interest rates. These are positive indicators that consumer confidence will soon return, addressing the current affordability challenges.”
Essaadi expressed hope that the consumer market would rebound, particularly as the holiday season approaches, stating, “We are transitioning out of the rainy season and entering the peak period. Historically, we’ve seen demand surge between December and January, and we believe it’s likely to happen again. The volatility in Nigeria is remarkable—things can change overnight.”
The rights issue is tradable on the Nigerian Exchange, allowing existing shareholders to sell their rights to interested investors. The offer, facilitated by Vetiva Advisory Services Limited, opened
on September 2 and will close on October 11.
In making a case for shareholders to participate in the rights issue, Essaadi highlighted the company’s efforts to modernize its production facilities over the past three years, enhancing capacity across its product lines. He assured investors that, despite the current economic headwinds, these upgrades position the company for long-term returns.
Reflecting on the company’s financial performance for 2023, the Chief Financial Officer reported robust growth in revenue and earnings before tax, though the gains were offset by foreign exchange revaluations. He stressed that the capital raise is essential to eliminating the debt portfolio and positioning the company for sustained success.
