By Dipo Olowookere
More corporate organisations are looking in the direction of commercial papers to raise short-term capital aimed to finance some of their operations.
The latest firm considering this option is Guinness Nigeria Plc, one of the leading brewers in the country trading its shares on the Nigerian Stock Exchange (NSE).
The sector has been struggling since the federal government introduced a new excise duty regime, causing major players in the space to fight for survival, especially when they are unable to pass the price to consumers.
Guinness Nigeria, in its third quarter of the 2020 financial year, recorded a decline in profit before tax to N2.0 billion from N6.3 billion, while the profit after tax dropped to N1.4 billion from N4.3 billion.
As part of its efforts to turnaround the fortunes of the company, the management is looking to approach the capital market to raise fresh funds.
Business Post confirmed that Guinness Nigeria wants to launch a commercial paper issuance programme to secure funds from high-net worth individuals, pension fund administrators as well as asset managers.
In a response to an inquiry on Tuesday, spokesperson of the company, Mrs Viola Graham-Douglas, confirmed that the brewer will go to the market this year for fresh capital.
However, she did not state when this will happen and the size of the debt the management will secure for the running of the company.
“Guinness Nigeria Plc first established a Commercial Paper Programme in 2016, and management is considering a renewal of that programme.
“There are currently no defined timelines and structure to a proposed issuance,” Mrs Graham-Douglas told Business Post.
In 2016, about six months before Nigeria slipped into a recession, Guinness Nigeria listed series 2 and 3 N10 billion commercial paper issuance programme on the FMDQ Securities Exchange.
The N7.23 billion 182-day series 2 and N2.77 billion 268-day series 3 notes were issued to investors on November 4, 2015.
Since then, the firm has not sold commercial papers and from information gathered by Business Post, the company may issue before the end of the year, with some of the proceeds used to refinance its maturing short-term borrowings.
Guinness Nigeria, which controls about 22 percent of the market share in the country, has other sources to secure funds, including over N16 billion in unutilised bank debt and $23.1 million of intercompany loans at its disposal.
Share price of the firm, as at the time of filing this report on Wednesday, was flat at N18 per unit.
Adedapo Adesanya
Nice report, but I’m just wondering if Guiness products are widely consumed in Nigeria, considering the level of competition in their market.
Thanks for the compliments. With 22 percent market, it is safe to say their products are widely consumed in the country.