Cadbury Nigeria, a food, sweets and drink company, has announced plans to convert its outstanding shareholder loan of $7.7 million to equity in a bid to deleverage its balance sheet, reduce foreign exchange risk and improve profitability.
The conversion will involve issuing 402.082 million new ordinary shares to Cadbury Schweppes Overseas, the parent company, at the closing share price on December 27, 2023, according to a statement on Tuesday.
This will increase the company’s share capital by N201.04 million and rank the new shares equally with existing ones.
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“To address these challenges, the board of directors has proposed converting the outstanding loan into equity at the share price of the company as of December 27, 2023. This will result in the issuance of 402 million new ordinary shares to Cadbury Schweppes Overseas, the company’s parent company,” the statement said.
The company, a subsidiary of Mondelez International, noted that it has been facing challenges servicing its foreign currency-denominated loans due to Nigeria’s persistent foreign exchange scarcity. This resulted in significant unrealised exchange losses and impacted the company’s bottom line.
“The liberalisation of the foreign exchange market in June 2023 and the attendant devaluation of the currency put further pressure on the Company as the Naira value of its foreign currency-denominated loans increased significantly. This resulted in an unrealised exchange loss of N20.6 billion and a loss after tax of N10.2 billion for the period ended 30 September 2023.
“Despite these challenges, the Company has been able to repay Cadbury Schweppes Overseas, a total of $18.6 million of the principal and accrued interest, with an outstanding balance of $7.7 million as of 31 December 2023,” it added.
The fast-moving consumer goods company noted that between February 2021 and September 2023, Cadbury Schweppes Overseas, advanced intercompany loans totalling $23 million to Cadbury Nigeria to help settle outstanding third-party loans which it had obtained to fund its raw material imports and other input costs.