Why Nigeria’s biggest brewer is shutting two production plants

Nigerian Breweries Plc, Nigeria’s biggest brewer has indicated plans for a company-wide reorganisation which include the temporary suspension of operations in two of its nine breweries.

This was revealed in a statement signed by Sade Morgan, corporate affairs director of Nigerian Breweries.

“Following the recent announcement of its business recovery plan, Nigerian Breweries Plc has indicated plans for a company-wide reorganisation aimed at securing a resilient and sustainable future for its stakeholders,” she said.

She said the move is essential to improve the company’s operational efficiency, financial stability and enable a return of the business to profitability, in the face of the persistently challenging business environment.

While speaking about these developments, Hans Essaadi, managing director/CEO of Nigerian Breweries Plc, described the business recovery plan as strategic and vital for business continuity.

“The tough business landscape characterised by double-digit inflation rates, naira devaluation, FX challenges and diminished consumer spend has taken its toll on many businesses, including ours.

“This is why we have taken the decision to further consolidate our business operations for efficient cost management and optimal use of our resources for future sustainable growth,” he said.

“We recognise and regret the impact that the suspension of brewery operations in the two affected locations may have on our employees,” Essaadi said.

He stated that Nigerian Breweries is committed to limiting the impact on its people as much as possible by exhausting all options available including the relocation and redistribution of employees to its other seven breweries and providing strong support and severance packages to all those that become unavoidably affected.

“We are also committed to supporting our host communities in ways that ensure they continue to feel our presence.

“We remain wholly committed to having a positive impact on our host communities and our consumers;

leveraging our strong supply chain footprint; excellent execution of our route to market strategy; and our

rich portfolio of brands across the Lager, Stout, Malt, Soft drinks, and Energy drinks categories; and more

recently, Wines and Spirits with the acquisition of Distell”, he added.

Nigerian Breweries recently added to its broad portfolio with the acquisition of an 80 percent business stake in Distell Wines and Spirits Limited, a local business in the wines and spirits

category, as a demonstration of its resilient and forward-thinking strategy to deliver long-term value creation for its shareholders and other stakeholders.

The Nigerian Breweries’ Business Recovery Plan includes a Rights Issue and a company-wide reorganisation exercise which includes temporary suspension of 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.

In letters signed by Grace Omo-Lamai, human resource director at Nigerian Breweries, addressed to the

leadership of the National Union of Food, Beverage & Tobacco Employees (NUFBTE) and the Food

Beverage and Tobacco Senior Staff Association (FOBTOB), the company informed both unions that its proposed plan would include operational efficiency measures and a company-wide reorganisation that includes the temporary suspension of operations in two of its nine breweries.

As a result, and in accordance with labour requirements, the company invited the unions to discussions on the implications of the proposed measures.

Nigerian Breweries recently notified the Nigerian Exchange Group (NGX) of its plan to raise capital of up to N600 billion by way of a Rights Issue, as a means of restoring the company’s balance sheet to a healthy position following the net finance expenses of N189 billion recorded in 2023 driven mainly by a foreign exchange loss of N153 billion resulting from the devaluation of the naira.

Despite increasing prices last year, Nigerian Breweries Plc, the biggest brewer in Nigeria, reported a loss for the first time in at least 11 years, according to data compiled by BusinessDay.

In the company’s latest audited financial statement, it reported an after-tax loss of N106.3 billion compared to a profit of N13.2 billion in 2022.

“The Nigeria business landscape experienced significant shifts in 2023 with substantial impact on businesses and livelihoods nationwide. The redesign of the naira notes which resulted in cash shortage that severely hampered social and economic activities nationwide set the tone for a turbulent year,” Uaboi Agbebaku, the company secretary, said in a statement.

“In a difficult operating environment, the Board will ensure that the company builds on its more than 77 years experience of operating in Nigeria to cope with current realities. The company will continue to be resilient and forward-thinking, leveraging our broad portfolio, strong supply chain footprint and passionate workforce to drive long-term value creation for its shareholders and other stakeholders,” he said.