Why International Breweries initiates rights issue to shareholders

International Breweries Plc says it is initiating a rights issue to settle a dollar-denominated loan, exerting downward pressure on its earnings.

International Breweries Plc says it is initiating a rights issue to settle a dollar-denominated loan, exerting downward pressure on its earnings.

Carlos Coutino, the managing director of International Breweries Nigeria, revealed this during the presentation of ‘Facts Behind The Rights Issue’ to capital market stakeholders at the Nigerian Exchange Ltd. (NGX) on Thursday in Lagos.

The firm recently obtained approval from the Securities Exchange Commission (SEC) to proceed with its proposed rights issue to existing shareholders, as conveyed in a notice to the NGX.

The rights issue will offer 161,172,395,100 ordinary shares at two Kobo each, priced at N3.65 per share, valued at N588,279 billion. 

The company noted that its existing shareholders could subscribe based on six new ordinary shares for every existing ordinary share held.

Mr Coutino said that the debt settlement through the rights issue would reduce the impact foreign exchange volatility had on the company’s earnings.

He said this would, therefore, reduce foreign exchange exposure, lead to improvements in cash flow, and support the company’s return to profitability.

According to him, the rights issue will address short-term liquidity support through working capital financing.

The managing director noted that despite the challenges in Nigeria’s operating environment, which affected the company’s financial performance in 2023, the country remained a compelling and attractive nation.

“Nigeria will be the third most populous country of the world by 2050, according to the World Bank population data sheet,” said Mr Coutino. “Nigeria has the second largest beer market in Africa with compelling outlook for beer consumption growth, underpinned by favourable population and median age.”

David Tomlinson, the brewery’s former finance director, said the company had significantly improved its working capital and cash flow since 2019.

Mr Tomlinson stated that the brewery had consistently improved its gross margin while its revenue grew from N131.351 billion in 2019 to N218.650 billion in the 2023 financial year.

He explained that the company’s revenue growth was mainly driven by strong volume performance, positive brand mix and revenue management initiatives.

(NAN)