Stable forex regime will trigger Nigerian Breweries, others’ return to profitability in 2024

Financial analysts have stated that a stable foreign exchange regime  would facilitate speedy return to profitability of Nigerian Breweries Plc and other multinationals that were hit by a gale of foreign exchange headwind in the 2023 financial year.

Speaking on the impact of the naira exchange on corporate performance, the Managing Director and Chief Executive Officer of Lyceum Alliance Limited, a financial advisory and management consulting firm), Dr. Jekwu Ozoemena expects a positive economic outlook as the country’s currency continues to stabilize against the dollar and other major international currencies.
 
Jekwu, who was at one time the Managing Director of Access Bank Zambia, blamed the poor performance of Nigerian Breweries on the steep drop of the naira in the foreign exchange market, blaming it for more than 90 percent of the loss the company posted.
 
“If you look at the 2023 annual result of Nigerian Breweries, for instance, the company actually performed well on most critical performance indicators but was shaken off the profits path by the external factor naira devaluation. For example, this company recorded a significant growth of more than N1 billion in assets, from N621 billion in 2022 to N797 billion 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.
 
On the business recovery plans recently announced by the brewing giants, Mr Ozoemene commended the bold initiatives, arguing that it was indicative of a management that is committed to retaining and rewarding the trust of its shareholders.
   
“I think you could see the strong commitment to recovering by the company. I might be wrong but the response by Nigerian Breweries represents the quickest and perhaps the boldest of all the companies affected by the foreign exchange challenges of the 2023 business year. 

  While others are still unsure of the best foot to put forward, Nigerian breweries have made its plans clear and if they follow them through, I can tell you that they’ll get past the challenges of the past year quicker than anyone could imagine,” Mr Ozoemene, who, at various times, was the Deputy Managing Director of Access Bank Rwanda and Managing Director and CEO of Access Bank Zambia, said.
 
Also 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.
 
Ali, who is also a public policy analyst, expressed his optimism that there would be a resurgence in the performance of the companies.
 
While also commenting on the business recovery plans announced by Nigerian Breweries, he the bold strategies that have been initiated by the company towards recovery are a sign that the rest of the economy would reflate soon.
 
“I am aware that Nigerian Breweries, for instance, is approaching the capital market to raise N600 billion through 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,” he stated.
 
He commended the majority shareholders of the company for restating their commitment to the Nigerian market by opting to raise 50 percent of the N600 billion being sought through the Rights Issue, insisting it was a good sign that the fundamentals of the Nigerian economy remain positive.
 
“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.