Market News

Forex: Analysts predicts better days for NB, others - PUNCH

APRIL 23, 2024

Some analysts have projected that companies like Nigerian Breweries Plc and others who have suffered hefty foreign exchange losses in the financial year ended 2023 will return to profitability on the back of a more stable foreign exchange regime.

NB Plc had announced N106bn loss for 2023, mostly as a result of the foreign exchange headwinds that led to the devaluation of the naira. In the same sector, International Breweries Plc suffered a loss of about N70.03bn on the back of foreign exchange losses (realised and unrealised).

Another multinational, Nestlé Nigeria, has independently revalued its property, plant and equipment to reflect a true and fair value as it aims to tackle a negative asset position at the end of 2023, mostly as a result of N79.6bn loss brought on by the revaluation of its foreign exchange obligations.

To tackle the loss, NB has announced strategic business recovery plans which include the raising of N600bn through rights issue, the inclusion of a whiskey portfolio in the basket of offerings, and the temporary closure of two of its nine breweries.

Speaking on the development, the Managing Partner of QL Resources, Abdulmumin Ali, who hinged Nigeria’s economic recovery on the resilience, energy, and creativity of Nigerians, said the foreign exchange instability occasioned by last year’s fall in the exchange rate of the naira will likely not be witnessed in much of 2024, thus giving rise to positive returns by most companies.

Also commenting on the business recovery plans announced by Nigerian Breweries, he said, “I’m aware that Nigerian Breweries, for instance, is approaching the capital market to raise N600bn through a rights issue. This sum, if successfully raised will not just reflate the company but also set it on the part of a new trajectory by offsetting the debts associated with the bleak balance sheet records of last year. I have also read that most of its dollar-denominated credit lines might be converted to naira thereby staving off exposure to the vicissitudes of foreign exchange fluctuations. These are positive steps that would engender quick recovery.

Ali went on to commend the majority shareholders of the company for restating their commitment to the Nigerian market by opting to take up their share of the N600bn right issue, saying it sent a strong signal to the international investor community about the Nigerian market.

“Heineken made a strong statement of its faith in this economy by opting to take up such a significant volume of the offer. What they did is a sign of confidence in the Nigerian economy and the message will be heard across the investment capitals of the world that Nigeria remains a fertile market for investments despite temporary setbacks,” the analyst said.

The Managing Director and Chief Executive Officer of Lyceum Alliance Limited, a financial advisory and management consulting firm, Dr Jekwu Ozoemena, also projected a positive economic outlook as the country’s currency continues to stabilise against the dollar and other major international currencies.

Ozoemena said, “If you look at the 2023 annual result of Nigerian Breweries, for instance, the company performed well on most critical performance indicators but was shaken off the profits path by the external factor of naira devaluation. For example, this company recorded a significant growth of more than N1bn in assets, from N621bn in 2022 to N797bn in 2023. It also made significant savings in the marketing side of the business, spending N51 billion in 2023 as against N57 billion in 2022. This means that the company, given all other factors, would have made more profits in 2023 than in 2022, but these were undone by the rapid decline in the value of the naira between August and December 2023,” he stated.

He, however, said that with the recent gains of the naira against the dollar, and the expected stability of the currency over the remaining months of the year, the expectations are that most companies operating in Nigeria that were adversely affected by the unstable periods of the naira will recover and return to profitability.


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