There are indications that International Breweries Plc will be in the black in a couple of years as a N588.27 billion rights issue helped shore up the brewer’s balance sheet and liquidity position.
According to research house CSL Stockbrokers Limited, following the rights issue, International Breweries now maintains a healthier financial position, with its N474 billion in borrowings fully repaid.
The company’s liquidity has improved significantly, as its cash and cash equivalents increased by 50.3 percent rising from N123.5 billion in December 2023 to N185bn at the end of June 2024.
It is expected that the newly commissioned Gateway Plant, which is one of the largest factories in Africa, will add strength to future earnings.
The company had been struggling with huge debts and foreign exchange scarcity and the sudden devaluation of the currency that stoked foreign exchange losses added salt to injuries.
As of the first six months through (HI) 2024, International Breweries reported a substantial net foreign exchange loss of N141.98 billion, with 75 percent (N106.55 billion) realized and 25 percent (N35.45 billion) unrealized.
That resulted in a loss after tax of N106.78 billion, which jeopardies dividend payment as the company’s share price has plummeted.
“We believe International Breweries Plc earnings will likely remain under pressure as the company continues to navigate challenging macroeconomic conditions’’ said analysts at CSL Stockbrokers Limited.
“However, based on our expectations for top line growth and cost of sales, we anticipate an improvement in the company’s operating performance in the near term. We forecast a gradual recovery in profitability, driven primarily by price increases and enhanced operational efficiency,” said analysts at CSL Stock Brokers.
Since the foreign exchange losses are a one off event that do not recur at all times as there is expectation that currency risk will recede with the gradual strengthening of the Naira, International Breweries’ path to profitability is near and shareholders will be getting paid dividends.
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