Listed firms raise over N1.3tr in nine months as balance sheet, profit shrink

•As investors decry effect of harsh business environment on corporates
•’High energy cost affecting production cost, eroding profit’, shareholders lament

Rising inflation, foreign exchange (FX) crisis, business climate uncertainty and other macroeconomic challenges, which have severely battered the balance sheet of listed companies pushed seven corporates to opt for fresh capital raising of up to N1,300 trillion in nine months to shore up capital deficit.

The companies are Nigerian Breweries, International Breweries, Notore Chemical Industries, Ella Lakes, Tantalizer, Royal Exchange and Sovereign Trust Assurance.

A breakdown of the capital raising showed that Nigerian Breweries Plc is currently in the market to raise N599.1 billion via rights issue. The company is offering 22.607 billion ordinary shares at 50k each, priced at N26.50 per share to existing shareholders.

The company secretary, Uaboi Agbebaku, said the fund would help eliminate FX losses from the company’s balance sheet and reduce its interest burden on local debts.

Similarly, International Breweries opened its N588 billion rights issue programme on May 21, 2024. The company issued 161,172,395,100 new ordinary shares of 2 kobo each at an offer price of N3.65 per share. The company has revealed that the net proceeds from the rights issue would be used to settle its outstanding U.S. dollar-denominated loan and provide working capital support.

For Notore Chemical Industries, the firm raised additional capital of N105.79 billion through a private placement. The capital raise was facilitated through the issuance of 2,418,099,300 ordinary shares valued at N0. 50k each, with a share price set at N43.

Ella Lake Plc raised an additional N2.90 billion in capital through a rights issue. The company offered a rights issue of 1,000,000,000 Ordinary Shares of 50 Kobo each at N2.90 per share, which brings the total value of the capital to N2.90 billion.

Tantalizers Plc successfully raised an estimated N1.07 billion through a private placement, as the fast food chain continues its restructuring plans. Royal Exchange embarked on a N1.56 billion rights issue from its shareholders to boost its operations. The funds, however, represented three-quarters of the entire N2.06 billion sought by the group under the rights issue.

Sovereign Trust Insurance also raised new equity funds of N1.42 billion through rights issue from its existing shareholders.

Indeed, government reforms, especially the present administration’s policies have severely impacted operations of listed firms and weakened their balance sheet.

Since the beginning of 2023, the foreign exchange crisis has put the naira on a downward trend causing quoted companies under the Fast-Moving Consumer Goods (FMCG) to record huge losses due to naira devaluation.

For instance, five listed firms across various sectors: Nigerian Breweries, Cadbury Plc, Nestle, Dangote Cement and MTN suffered N723.8 billion loss in 2024 half-year operations.

Also, in the corresponding period in 2023, Dangote cement, Cadbury, Nestle, Nigerian Breweries, Guinness, MTN, and Airtel incurred N623.6 losses.

Investigations revealed that these firms achieved strong operating performance but were impacted by the FX crisis and naira devaluation.

Operators argued that improved liquidity in the FX market over time would help to alleviate the challenges faced by international businesses, especially as it relates to accessing foreign exchange.

According to them, it has become imperative for listed firms to raise additional capital to boost balance sheets and expand operations and stay ahead of trends with the current economic reality.

They pointed out that more corporate entities would approach the market before the first quarter of 2025 to raise additional capital as a hedge against economic challenges.

These corporates must battle with the Deposit Money Banks already raising capital from the market to meet the N500 billion recapitalisation threshold as directed by the Central Bank of Nigeria (CBN).

President of New Dimension Shareholders Association of Nigeria, Patrick Ajudua, said many listed firms are currently in dilemma seeking appropriate measures that would help erase FX losses, which have continued to shrink their profitability.

He pointed out that the devaluation of the naira has crippled the financial operation of many companies, noting that efforts must be accelerated to tackle these problems and improve shareholders value on investment.

“This harsh business environment is a disincentive to investment; it has prompted many companies to close down and turn moribund while others are struggling to survive.

“For instance, the recent hike in energy prices is seriously affecting the cost of raw materials needed for production. Most companies have decided to pass the cost to consumers resulting in low patronage, low-quality production shrinking profitability,” he said.