Nigerian Breweries (NB) Plc said it has been forced to temporarily shut two of its 9 factories as part of its business recovery plan following the company’s operational net loss of N106 billion in 2023, occasioned by naira depreciation, high inflation, foreign exchange (FX) challenges and diminished consumer disposable income.
Jerrymusa.com reports that NB Plc’s managing director, Hans Essaadi, made this announcement yesterday at a press conference in Lagos. He said that in order to get the company back on the path of profitability, NB had to implement a business recovery plan, which is why the company also decided to raise N600 billion through a rights issue.
The business recovery plan entails a rights issue, a review of the company’s current organisational structure and size, the temporary suspension of operations in two of its nine breweries, and an optimisation of production capacity in the other seven breweries, some of which have received significant capital investment in recent years, Essaadi said in a press conference alongside other members of the management team.
Inflation Rate Setback
He claims that the corporation has summoned the relevant workers’ unions for talks on the ramifications of the proposed changes in compliance with labour laws.
Considering the ongoing difficulties in the operational environment, Essaadi characterised the business recovery strategy as important and imperative.
“Many firms, including ours, have suffered as a result of the challenging economic environment marked by double-digit inflation rates, depreciation of the naira, foreign exchange difficulties, and decreased consumer spending.
He went on, “For effective cost management, we have decided to further consolidate our business operations.”
“Our revenue grew from N551 billion in 2022 to N600 billion in 2023 while the operating profit declined by 15% from N53 billion in 2022,” he stated, focusing specifically on the company’s performance in 2023 due to higher input cost and one-off reorganisation cost, despite the strong and aggressive cost savings and other efficiency measures.
Nevertheless, the company’s N106 billion net loss for the year was mostly caused by the depreciation of the Naira, which led to a N153 billion foreign exchange loss, and increased interest rates on loans and borrowings for capacity growth.
In contrast to the long-standing custom of regular dividend payments, the company’s board was unable to recommend any dividend payment for the 2023 fiscal year due to the loss.
The board has decided to present a recapitalization scheme by way of rights issue to shareholders for review and approval at its upcoming annual general meeting (AGM). This scheme would raise additional capital up to N600 billion, which would be used to settle the outstanding foreign exchange payables and partially pay for local bank facilities.