International Breweries seeks “Rights Issue” to pare down mountain debt
International Breweries Plc (IB PLC) has notified the Nigerian Stock Exchange (NSE) of its intention to seek a “Rights Issue” following a meeting of the company’s Board of Directors on 18th September 2019.
In a statement sent to the NSE on Wednesday, the company said that the “Board of Directors of International Breweries Plc at its Board meeting held on 18 September, 2019 considered and approved a proposal for a Rights Issue as a form of Capital Raising for the Company.”
A rights issue is an issue of shares offered at a special discounted price by a company to its existing shareholders in proportion to their holding of old shares.
International Breweries has seen its debt overhang grow as it mounts a challenge to break the dominance of the Nigerian beer market by Heineken controlled Nigerian Breweries Plc and Guinness Nigeria Plc, a subsidiary of Diageo Plc. While it has experienced strong revenue growth with the expansion of its capacity, the growth has come at a cost. The company recorded a net loss of N4bn in 2018 and the losses have continued into the first-half of 2019, recording N6.8bn in net loss.
A web-based financial resource and literacy company, Nairametrics, recently reported that “for every N100 in sales, it [IB PLC] spends N69 as direct cost. And out of the balance of N31, it spends another N15 on marketing and promotion, as well as N20 on operating expenses, leaving it with an operational loss.
“On paper, the company does not generate enough revenues to pay for its humongous N225 billion loans,” the report said.
IB Plc has not disclosed how much it is seeking to raise though it did say that “the Board approval of the aforementioned is however subject to Shareholders and Regulatory approvals in the prescribed form.”
International Breweries Plc is the Nigerian subsidiary of Anheuser-Busch InBev (AB InBev), the world’s largest brewer. Some of its brands include Hero Lager, Trophy Lager, Beta Malt, Grand Malt and Budweiser amongst others.