Economy

ANALYSIS: The Problem With International Breweries N165bn Rights Issue

Published

6 years ago

20/12/2019

By Dipo Olowookere

Not too long ago, the board of International Breweries announced that it plans to raise about N165 billion from its existing shareholders through rights issue.

According to board, proceeds from the exercise would be wholly used to refinance part of the N245 billion debts the brewery giant incurred from five local and foreign lending institutions; Citibank N.A, Zenith Bank, Standard Chartered Bank Nigeria, Stanbic IBTC and Rand Merchant Bank Nigeria.

Analysts at Meristem Research said if this exercise is 100 percent successful, the company’s debt burden should significantly reduce by 66 percent to about N81.90 billion, with the finance costs hovering between N5.5 billion and N6 billion in 2020.

But it noted that while this should be good news to shareholders of the firm, the bitter truth is that International Breweries has been operating at a loss since 2017 and that the N165 billion rights issue may have little impact on the overall performance of the company without a strategy to effectively cut costs.

“We note that the financing decision does not solve the operating problems of the company which is responsible for the poor margins,” the investment firm said in its report seen by Business Post.

It further said, “Costs have been high and hampering profits and if this persists, the company’s performance will not improve. Therefore, we believe that International Breweries’ current operating profile negatively affects its ability to deliver value to shareholders.”

“In addition, the potential dilution in earnings will erode the near-term benefits. We also expect that the company will require additional capital to boost its working capital needs, a measure that will not materialise with this issue.

“Hence, we expect it to raise debt in the near term or equities with the potential for more earnings dilution. We therefore do not expect the benefits of this financing decision to improve margins in the near-term,” the report also stated.

Giving an insight on the brewery giant’s performance, Meristem Research said before it became a subsidiary of AB InBev, the largest beer producer in the world, the brewer operated an average cost to sales of 55.12 percent, second to Nigerian Breweries at 52.88 percent, the cost leader in the industry.

However, since this deal was finalised, the firm has made consecutive losses, which worsened to N16.45 billion in 9M:2019, with cost to sales trending northwards at 60.75 percent in 2018FY, 64.42 percent in Q1:2019, reaching its highest point of 68.00 percent in 9M:2019 due to a spike in production costs- raw material costs and production staff salaries shot up by 27.99 percent and 45.22 percent respectively.

In addition, revenue has continued to decline despite initially rising after the completion of its new plant in Sagamu, Ogun State, which ranks as the second largest in Africa.

The turnover first grew YoY by 32.16 percent and 23.54 percent in Q1:2019 and Q2:2019 respectively, but went down by 5.32 percent to N28.63 billion in Q3:2019 from N30.24 billion in Q3:2018 as increased excise duties and competitive pressures constrained topline growth. Also, the firm’s depreciation charges rose in 9M:2019 by 31.54 percent YoY, contracting the gross margin to 32.00 percent (vs. 38.67 percent in 9M:2018).

It was noted that high operating costs has been another worrisome trend post-merger, a major factor for the thinning operating margin which turned negative in 9M:2019 at -11.25 percent, saying the firm has been expending higher costs on advertising (+36.10 percent in 9M:2019) as well as transportation and distribution expenses (up by 36.53 percent during the same period) in order to stay competitive.

“Apart from the high production and overhead costs pressuring margins, finance costs, which increased by 45.81 percent to N13.14 billion in 9M:2019, has been a drag on the company’s performance.

“Benefits can only accrue to shareholders if the company maintains a lid on costs, which seems to be slipping out of hand,” the report stated.

International Breweries, which controls 20.35 percent of the beer sector in Nigeria as at FY2018, is raising N165 billion by selling 18,266,206,614 units of shares on the basis of 17 new shares for every eight held by shareholders whose names were on the register of the company as at November 6, 2019 at N9.00 each.

Meristem Research, giving its verdict on the exercise based on the above issues it highlighted, declared that, “We do not recommend that shareholders take up their rights.”

Economy

MRS Oil, FrieslandCampina Wamco Shrink NASD Index by 0.68%

Published

18 hours ago

06/06/2026

Adedapo Adesanya

By Adedapo Adesanya

The duo of MRS Oil and FrieslandCampina Wamco Nigeria Plc weakened the NASD Over-the-Counter (OTC) Securities Exchange by 0.68 per cent on Friday, June 5.

MRS Plc lost N19.00 during the session to sell at N171.00 per share compared with Thursday’s value of N190.00 per share, and FrieslandCampina Wamco Nigeria Plc depreciated by N8.70 to finish at N181.68 per unit compared with the preceding session’s N190.38 per unit.

As a result, the market capitalisation further lost N22.59 billion to close at N2.607 trillion versus the N2.630 trillion it ended a day earlier, and the NASD Unlisted Security Index (NSI) dropped 37.76 points to settle at 4,358.32 points, in contrast to the previous day’s 4,396.08 points.

The alternative stock market closed the last trading day of this week with a price gainer, Central Securities Clearing System (CSCS) Plc, which gained 6 Kobo to quote at N78.40 per share compared with the preceding session’s N78.34 per share. However, it could not prevent the market from going down at the close of business.

Yesterday, the volume of securities bought and sold by investors went down by 50.0 per cent to 140,345 units from the preceding day’s 280,714 units, the value of stocks decreased by 16.5 per cent to N17.9 million from the previous session’s N21.5 million, and the number of deals carried out by market participants fell by 35.7 per cent to 27 deals from the 42 deals recorded on Thursday.

When trading activities closed for the day, Great Nigeria Insurance (GNI) Plc remained the most active stock by value on a year-to-date basis, with 3.4 billion units exchanged for N8.4 billion, trailed by Infrastructure Credit Guarantee (Infracredit) Plc with 2.3 billion units sold for N6.5 billion, and CSCS Plc with 64.7 million units traded for N4.4 billion.

GNI Plc also ended the session as the most traded stock by volume on a year-to-date basis, with 3.4 billion units worth N8.4 billion, followed by Infracredit Plc with 2.3 billion units transacted for N6.5 billion, and Resourcery Plc with 1.1 billion units valued at N415.7 million.

Economy

NGX Index Rebounds 0.15% on Renewed Interest in Financial Stocks

Published

18 hours ago

06/06/2026

Dipo Olowookere

By Dipo Olowookere

Renewed interest in financial stocks and others lifted the Nigerian Exchange (NGX) Limited by 0.15 per cent on Friday.

Customs Street closed higher yesterday despite the 1.37 per cent loss recorded by the consumer goods sector as a result of profit-taking.

This was offset by gains in the other key sectors of the local bourse, as the insurance counter chalked up 1,14 per cent. The banking space appreciated by 0.90 per cent, the industrial goods segment grew by 0.46 per cent, and the energy sector expanded by 0.01 per cent.

Consequently, the All-Share Index (ASI) went up by 366.00 points to 242,593.31 points from 242,227.31 points, and the market capitalisation gained N235 billion to close at N155.594 trillion compared with the previous day’s N155.359 trillion.

The trio of International Energy Insurance, Abbey Mortgage Bank, and DAAR Communications improved by 10.00 per cent each yesterday to N7.26, N9.35, and N1.98, respectively, while Zichis advanced by 9.39 per cent to N32.38, with Sovereign Trust Insurance up by 8.70 per cent to N2.50.

On the flip side, Academy Press lost 9.84 per cent to quote at N8.25, University Press depreciated by 9.73 per cent to N5.10, Africa Prudential dipped by 2.63 per cent to N12.95, Chams crumbled by 2.44 per cent to N4.00, and International Breweries slipped by 1.59 per cent to N12.35.

Business Post reports that the market breadth index was positive during the session after recording 37 appreciating equities and 14 depreciating equities, implying strong investor sentiment.

Abbey Mortgage Bank led the activity chart with a turnover of 164.1 million units worth N1.5 billion, Ellah Lakes sold 76.7 million units for N767.2 million, Access Holdings transacted 44.8 million units valued at N1.1 billion, Linkage Assurance exchanged 23.0 million units worth N41.2 million, and The Initiates traded 20.2 million units for N562.1 million.

At the close of trades, market participants transacted 608.5 million units worth N32.0 billion in 53,826 deals versus the 588.5 million units valued at N27.9 billion executed in 57,352 deals in the previous session. This showed that the number of deals eased by 6.15 per cent, the volume of transactions rose by 3.40 per cent, and the value of transactions soared by 14.70 per cent.

Economy

Naira Depreciates to N1,362/$1 at Official Market

Published

18 hours ago

06/06/2026

Adedapo Adesanya

By Adedapo Adesanya

The Naira further depreciated against the United States Dollar by N3.46 or 0.25 per cent to N1,362.21/$1 from N1,358.75/$1 in the Nigerian Autonomous Foreign Exchange Market (NAFEX) on Friday, June 5.

However, it appreciated against the Pound Sterling in the same market window during the session by N4.47 to trade at N1,823.59/£1 compared with the previous day’s N1,828.06/£1, and gained N7.00 against the Euro to sell at N1,574.58/€1, in contrast to Thursday’s closing price of N1,581.58/€1.

For another trading session, the Nigerian Naira maintained stability against the Dollar in the parallel market and the GTBank forex counter on Friday at N1,375/$1 and N1,372/$1, respectively.

The Naira is expected to remain strong in the near term, backed by a rise in external reserves, which are nearing $50 billion, enhancing analysts’ confidence about its outlook in the second half of 2026.

Heightened global uncertainty has reduced the incentive for importers and corporates to demand FX, as cautious trade weighs on import needs. Analysts estimate a $40 billion net FX position for the year, a projection anchored in oil windfall gains.

As for the cryptocurrency market, prices remained depressed following a strong US jobs report that spurred markets to price in higher-for-longer interest rates, sending Treasury yields and the dollar up while hammering stocks, especially AI-related names. Crypto markets saw heavy leverage washouts with about $1.6 billion in positions liquidated over 24 hours.

Ethereum (ETH) gave up 4.9 per cent to trade at $1,584.68, Solana (SOL) fell by 3.3 per cent to $63.22, Bitcoin (BTC) crashed by 1.9 per cent to $61,333.23, Dogecoin (DOGE) slipped by 1.8 per cent to $0.0821, and Ripple (XRP) moderated by 1.8 per cent to $1.09.

Further, TRON (TRX) dropped 1.6 per cent to sell at $0.3197, Binance Coin (BNB) slumped by 1.0 per cent to $581.18, and Cardano (ADA) declined by 0.4 per cent to $0.1589, while the US Dollar Tether (USDT) gained 0.07 to sell at $0.9997, and US Dollar Coin (USDC) closed flat at $0.9998.