• Friday, March 29, 2024
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International Breweries is to resurrect from the dead

International Breweries donates medical supplies to curtail spread of Coronavirus

International Breweries Nigeria Plc is about to wake up from a slumber as parent company, Anheuser-Busch InBev (AB InBev), has committed to investing more than N123 billion in the Nigerian brewers’ operations.

The world’s largest brewer is committed to injecting rights issue into its subsidiary.

International Breweries has concluded plans to raise N164.39 billion through a rights issue of N18.266 billion ordinary shares of 50 kobo each at N9 per share which will be pre-allotted on the basis of 17 new ordinary shares of 50 kobo each for every eight ordinary shares of 50 kobo each held as at the close of business on November 6, 2019.

The capital injection will help lower debt in the balance sheet of the Nigerian brewer that has been recording recurring losses due to stiff competition and operating environment.

For instance, total debts (long and short term) stood at N243.82 billion as at September 2019, this represents a 12.27 percent increase from the previous year.

International Breweries is highly leveraged, which means it finances nearly all of its operations with debt, exposing it to financial risk.

The debt to equity (D/E) ratio stood at 13.01 percent as at September 2019, this compares with 6.11 percent as at September 2018.

This means investors own N618 of every Naira of company assets while creditor own N1,303.

The debt to equity ratio shows the percentage of company financing that comes from creditors and investors. A higher debt to equity ratio indicates that more creditor financing (bank loans) is used than investor financing (shareholders)

As a result of rising cost of production and spiralling interest expense, International Breweries recorded a loss of N16.45 billion as at September 2019.

Brewers in Africa’s largest economy have been grappling with heavy taxes imposed by the Federal Government while high unemployment and poverty have put consumer spending check.

A lot of Nigerians have downgraded to cheap brands and premium beers are inaccessible.

AB InBev had in 2017 merged its three indirect Nigerian subsidiaries-International Breweries Plc, Intafact Beverages Limited and Pabod Breweries Limited. The merger was done through a scheme of merger with International Breweries subsisting as the post-merger company. The merger was seen as a major strategic move by Anheuser-Busch InBev to upend competition and consolidate its Nigerian base for further expansion into the sub-Saharan Africa (SSA).

 

BALA AUGIE