Nigerian Breweries, in which Heineken owns a majority stake, has set out plans to suspend production at two of its nine plants.
The Star lager brand owner posted a loss of N106bn ($92.9m) in 2023 and has prepared moves to bear down on costs and shore up its balance sheet.
In a stock-exchange filing, the publicly listed Nigerian Breweries did not name the two production sites that may see a “temporary suspension” of their output. Just Drinks has approached Heineken for further comment. However, Nigerian Breweries said it had invited unions to discuss the plans.
“We recognise and regret the impact that the suspension of brewery operations in the two affected locations may have on our employees,” Hans Essaadi, Nigerian Breweries’ CEO, said.
“We are committed to limiting the impact on people as far as possible and providing strong support and severance packages to all affected.”
The brewer is also planning to raise N600bn through a rights issue. Its 2023 loss – which compared to a N13.19bn profit in 2022 – came on the back of rising “operational costs” and exchange-rate volatility. Nigerian Breweries booked foreign-exchange losses of N153bn amid the devaluation of the naira.
The company is also looking to “optimise” production at its other seven breweries.
“The tough business landscape characterised by double-digits inflation rates, naira devaluation, FX challenges and diminished consumer spend has taken its toll on many businesses, including ours,” Essaadi added.
“This is why we have taken the decision to further consolidate our business operations for efficient cost management. It will also improve our operational and financial stability and help return our business back to profitability, as we work together to secure the business for today and for future sustainable growth.”
Nigerian Breweries generated revenue of N550.64bn last year, up 8.9% on 2022, helped by “positive price mix”. Amid the fall in the value of the naira, food inflation stood at more than 30% in Nigeria in 2023, the company said.
However, the brewer’s cost of sales jumped almost 15%, leading to a dip in gross profit of 0.3% to N212.61bn.
Profit from operating activities fell 15.1% to just under N44bn amid higher input costs and reorganisation expenses.
Heineken’s group beer volumes dropped 4.7% in 2023 and the Amstel owner said two markets “represented more than 60% of the decline” – Vietnam and Nigeria.
In 2023, Heineken saw its sales volumes in Nigeria decline at a rate “in the high teens”, the Dutch giant said in February when it reported its annual results.
In March, Heineken confirmed it had agreed a deal to sell its interest in Champion Breweries, another Nigeria-based beer business.
The company is to offload its majority interest in the Champion Lager owner to EnjoyCorp, a local holding that says it is “building a portfolio of food, beverage and hospitality brands”.
Heineken is selling The Raysun Nigeria Company Limited, which owned an 86.5% stake in publicly listed Champion Breweries, a business centred around one brewery and based in Uyo.
The financial terms of the deal were not disclosed by Heineken, Champion Breweries nor EnjoyCorp.
A Heineken spokesperson told Just Drinks at the time: “The decision will allow greater focus on our core business in Nigeria, while finding a local investor with the ability to allow Champion to continue its development in the best way to suit local market conditions.”
