Nigerian Breweries to raise N15bn commercial paper

IN order to raise capital to support its short-term funding needs, the management of Nigerian Breweries Plc has decided to sell commercial papers worth N15 billion to investors.

Nigerian Breweries Plc, is seeking to raise up to N15 billion in the first and second series of its N100 billion commercial paper Programme to support its short-term funding requirements. The company is offering 11.59 per cent and 14.43 per cent yield on its 90- and 182-day commercial paper.

The offer for the series 1 and 2 commercial papers, which opened on Thursday, April 11, will last for a week and close on Thursday, April 18, while the settlement date will be April 23.

The Series 1 commercial paper has a tenor of 90 days, an effective yield of 11.59 per cent and a discount rate of 11.268 per cent.

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The Series 2 commercial paper has a tenor of 182 days, an effective yield of 14.43 per cent and a discount of 13.46 per cent. The commercial papers, which were awarded AA rating by Agusto & Co Limited and AA rating by Global Credit Ratings Co, have a minimum subscription amount of N5 million and in multiples of N1000 thereafter.

Also, while the series 1 has an effective yield of 11.59 percent and maturing on July 22, 2019, the series 2 has an effective yield of 14.43 percent maturing on October 22, 2019.

Nigerian Breweries has faced stiff competitions from other brewery brands in the market, especially from those also listed on the Nigerian Stock Exchange (NSE) like Guinness Nigeria, International Breweries and others.

In its 2018 financial statements, the company explained that its performance was affected by the new excise duty regime introduced by the federal government in mid-2018, which raised the amount collected from alcohol producing companies in the country.

This was evident in the gross earnings of the firm last year, which dropped to N324.4 billion from N344.5 billion in 2017.

Since the hike in excise duty last year, the company has not increase prices of its products, ostensibly because of competitors and the low purchasing power of consumers as a result of the economic situation of the country.

In the end, Nigerian Breweries closed 2018 fiscal year with a profit before tax of N29.4 billion against N46.6 billion in 2017 and a profit after tax of N19.4 billion in contrast to N33 billion in 2017.

With the raising of N15 billion through this commercial paper, the brewery company is hoping to improve its operations in order to boost its performance in the present financial year.