Economy
ANALYSIS: The Problem With International Breweries N165bn Rights Issue
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
BNB Price Reflects Changing Dynamics in the Digital Asset Market
Economy
NASD Unlisted Security Index Crosses 4,000-point Benchmark Again
By Adedapo Adesanya
The NASD Over-the-Counter (OTC) Securities Exchange achieved a milestone on Friday, April 24, 2026, after five securities on the platform helped with a 1.85 per cent growth.
Data showed that the NASD Unlisted Security Index (NSI) again crossed the 4,000-point benchmark yesterday.
The index chalked up 73.64 points during the trading day to close at 4,052.59 points compared with the preceding session’s 3,978.95 points, while the market capitalisation added N5.38 billion to finish at N2.424 trillion versus Thursday’s closing value of N2.380 trillion.
The price gainers were led by Okitipupa Plc, which grew by N25.00 to sell at N305.00 per share compared with the previous price of N280.00 per share. Central Securities Clearing System (CSCS) Plc gained N6.92 to close at N76.26 per unit versus N69.34 per unit, Afriland Properties Plc appreciated by N1.00 to N17.00 per share from N18.00 per share, FrieslandCampina Wamco Nigeria Plc improved by 55 Kobo to N99.55 per unit from N99.00 per unit, and Food Concepts Plc increased by 5 Kobo to N2.70 per share from N2.65 per share.
However, there was a price loser, MRS Oil, which dipped by N21.75 to N195.75 per unit from N217.50 per unit.
During the final session of the week, the value of securities jumped 75.2 per cent to N41.3 million from N23.6 million units, and the number of deals expanded by 62.9 per cent to 44 deals from 27 deals, while the volume of securities declined marginally by 0.9 per cent to 447,403 units from 451,522 units.
At the close of trades, Great Nigeria Insurance (GNI) Plc was the most traded stock by volume (year-to-date) with 3.4 billion units worth N8.4 billion, trailed by Resourcery Plc with 1.1 billion units valued at N415.7 million, and Infrastructure Guarantee Credit Plc with 400 million units traded for N1.2 billion.
GNI was also the most active stock by value (year-to-date) with 3.4 billion units sold for N8.4 billion, followed by CSCS Plc with 59.6 million units transacted for N4.0 billion, and Okitipupa Plc with 27.8 million units exchanged for N1.9 billion.
Economy
Naira Slips to N1,358/$1 as FX Reserves, Policy Uncertainty Concerns
By Adedapo Adesanya
It was not a good day for the Nigerian Naira in the currency market on Friday, April 24, as its value depreciated against the major foreign currencies at the close of transactions.
In the Nigerian Autonomous Foreign Exchange Market (NAFEX), it lost N4.53 or 0.33 per cent against the United States Dollar yesterday to trade at N1,358.44/$1, in contrast to the N1,353.91/$1 it was exchanged on Thursday.
Equally, the domestic currency slipped against the Pound Sterling in the official market during the session by N8.14 to close at N1,834.02/£1, compared with the previous rate of N1,825.88/£1 and dropped N8.01 against the Euro to sell at N1,590.73/€1 versus N1,582.72/€1.
Also, the Naira depreciated against the US Dollar at the GTBank FX desk on Friday by N4 to quote at N1,370/$1 compared with the previous session’s N1,366/$1, and at the parallel market, it depleted by N5 to settle at N1,380/$1 versus the preceding day’s N1,375/$1.
Data published by the Central Bank of Nigeria (CBN) indicated that NFEM interbank turnover surged to N43.562 million across 68 deals, up from N28.117 million the previous day.
Despite the CBN’s reassurance that the recent drop in external reserves is not worrisome, the market remains unsettled by persistent concerns over liquidity constraints, policy transparency, and weakening confidence in Nigeria’s FX market as gross reserves continue to decline to $48.4 billion.
The outlook for the Dollar appears supported by broader macro risks, including elevated oil prices tied to the tanker traffic disruptions in the Strait of Hormuz and a continued US-Iran standoff over ceasefire negotiations.
A look at the digital currency market showed that investors are sitting on the edge as the US Dollar rebounded amid geopolitical and inflation risks despite continued inflows into US spot bitcoin Exchange Traded Funds (ETFs).
Solana (SOL) rose by 1.2 per cent to sell $86.45, Cardano (ADA) appreciated by 1.1 per cent to $0.2517, Dogecoin (DOGE) grew by 0.9 per cent to $0.0989, Ripple (XRP) improved by 0.3 per cent to $1.43, Ethereum (ETH) soared by 0.2 per cent to $2,316.83, and Binance Coin (BNB) chalked up 0.1 per cent to sell for $637.44.
However, TRON (TRX) depreciated by 1.3 per cent to $0.3235, and Bitcoin (BTC) lost 0.2 per cent to close at $77,562.27, while the US Dollar Tether (USDT) and the US Dollar Coin (USDC) closed flat at $1.00 each.
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