Nigerian Breweries Plc - Source: Nigerian Breweries Plc 2014 Annual Report During the financial year

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    2015 Corporate Rating Report – Nigerian Breweries Plc

    Nigerian Breweries Plc

    Rating Assigned:

    Aa This is a company that possesses very strong financial condition

    and very strong capacity to meet local currency obligations as and

    when they fall due.

    Outlook: Stable

    Issue Date: September 2015

    Expiry Date: 30 June 2016

    Previous Rating: None



    Outline Page

    Rationale 1

    Company Profile 3

    Financial Condition 5

    Ownership, Mgt & Staff 8

    Outlook 10

    Financial Summary 11


    Olusegun Owadokun

    Isaac Babatunde

    Agusto & Co. Limited

    UBA House (5th Floor)

    57, Marina




    Nigerian Breweries Plc (“Nigerian Breweries”, “NB” or “the Company”) is

    the premier and largest brewing company in Nigeria. NB’s rating is

    underlined by the Company’s dominant position in the Industry; highly

    experienced and stable Board of Directors; and competent management

    team. The rating is also supported by NB’s strong financial condition

    which is validated by good profitability, low leverage, good cash flow

    and adequate working capital.

    Nigerian Breweries is a subsidiary of Heineken, the third largest global

    player in the Brewery Industry with international ratings of Baa1 by

    Moody’s and Bbb+ by Standard and Poor’s.

    During the year ended 31 December 2014, NB’s turnover decreased

    slightly by 1% to ₦266 billion but its profit before tax margin remained

    strong, while its three-year weighted average return on equity of 46%

    and three-year average profit before tax as a percentage of sales ratio of

    23% are well above our benchmarks. In the same vein, cash flow

    indicators such as operating cash flow as a percentage of sales (35%)

    and operating profit margin (25%) surpass our expectations. Leverage

    remains low, with 86% of liabilities as non-interest bearing. The

    Company’s interest cover is also very good at 17 times.

    The continuous decline in global crude oil prices since the last quarter of

    2014 has negatively impacted the Nigerian economy leading to a

    devaluation of the Naira by the Central Bank of Nigeria (CBN) from

    N168/$ to N197/$. Manufacturers and businesses which are heavily

    dependent on imported raw materials have been operating under strains.

    However, Agusto & Co expects this to have a minimal impact on the

    Company’s profitability as about two-thirds of the Company’s inputs are

    sourced locally. In addition, the conclusion of the merger with

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    Nigerian Breweries Plc

    Consolidated Breweries Plc with the expanded and diversified product

    offering is projected to significantly improve sales in the short to

    medium term.

    Based on the aforementioned, we have assigned NB a rating of ‘Aa’ with

    a stable outlook.

    •Strong demand for products.

    •Diversified product offering

    •Strong Parent Company

    •Qualified and experienced management team.

    •Market leadership

    •Good profitability

    •Strong Cash flow

    •Low leverage


    •Asset-liability mismatch


    •Poor state of infrastructure in the country

    •Security issues especially in the North-East

    •Stiff competition

    •Declining consumer disposable income


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    Nigerian Breweries Plc

    PROFILE OF NIGERIAN BREWERIES PLC Incorporated in November 1946 as a limited liability Company, Nigerian Breweries became a public limited

    liability company and was listed on the Nigerian Stock Exchange (NSE) in 1973. NB is currently the second

    most capitalised stock on the NSE with market capitalisation of ₦0.9 trillion as at 20 August 2015. The major

    shareholders of the Company are: Heineken N.V Group of the Netherlands holding (54.29%) through its

    subsidiaries (Heineken Brouwerijen B.V. (38.68%) and Distilled Trading International B.V. (15.61%). The

    remaining equity of 45.71% is held by Nigerians, foreign individuals and other institutional investors. The

    Heineken N.V. group is the world’s third largest beer manufacturer by volume with operations in more than

    70 countries, producing notable international brands such as Heineken.

    The Company built its first brewery in Lagos and recorded a landmark when the first bottle of Star lager beer

    was rolled off at the brewery bottling lines in June 1949. In 1957, the second brewery was commissioned in

    Aba; Kaduna brewery was established in 1963 and Ibadan in 1982. In 1993, another brewery was

    commissioned in Enugu but was discontinued in 2004 as a result of the construction of Ama Brewery which

    was commissioned in October 2003. The Ama brewery is currently the largest and most modern brewery in

    Nigeria. In addition, an ultra-modern malting plant was acquired in Aba in 2008. Following the conclusion of

    the merger between the Company and Consolidated Breweries Plc (CB plc) in 2014, three breweries (located

    in Imagbon, Awo-Omamma and Makurdi) were added to the already existing eight breweries owned by NB. In

    total, NB currently operates eleven breweries and two malting plants, spread across Nigeria.

    Since the launch of Star lager beer in 1949, the Company’s product portfolio has expanded remarkably to

    include alcoholic beverages such as Gulder (1970), Legend Extra Stout (1992) and Heineken (re-launched in

    1998) as well as non-alcoholic beverages like Maltina (1976), Amstel Malta (1994), Fayrouz (2006) and

    Climax (2010). Following the acquisition of Sona Systems and Life Breweries in 2011, Goldberg, Malta Gold

    and Life Continental were added to the Company’s product range. In 2014, Nigerian Breweries introduced a

    new line extension of the STAR brand called Star LITE, which contains 40% less calories compared to the

    regular Star. In addition, Legend Extra Stout extended its market penetration with a new look - a new stanoil

    and metalized label. In the same year, the Company introduced a new alcoholic beverage - ACE Passion

    Apple Spark, its first sparkling alcoholic drink. In February 2015, a new product called ACE Roots was

    launched as a healthy low sugar drink, being the second product to be launched under the ACE Series.

    On account of the merger with CB Plc, the following products were added to the Company’s product

    offerings: “33” Export lager beer, Williams dark ale, Turbo Kings dark ale, More lager beer, Maltex, Hi Malt

    and Breezer, which is a blend of rum and fruits (in three variants). By 2015, NB had 19 brands in the Nigerian

    market cutting across larger, stout, malt, ready-to-drink, carbonated soft drink and energy drinks.

    Nigerian Breweries is the market leader, controlling about two thirds of the lager market in Nigeria. The

    Company’s major competitor and key player in the stout market is Guinness Nigeria Plc (“Guinness”). NB’s

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    Nigerian Breweries Plc

    products are distributed across the country through seven major cities: Lagos, Abuja, Enugu, Ibadan, Kaduna,

    Aba and Benin. Dating back to 1986, the Company exports Gulder and Star to Europe and the West African


    Nigerian Breweries’ Head Office is located at Iganmu House, 1 Abebe Village Road, Iganmu, Lagos. NB’s

    fifteen-member Board of Directors comprises six executive and nine non-executive directors. The Board is

    led by the Chairman - Chief Kolawole B. Jamodu (CFR), while the management team is led by Mr. Nicolaas A.

    Vervelde as Managing Director/CEO. In the year under review, Messrs Jasper C. Hamaker and Frank N. Nweke,

    Jr resigned from the Board, while Mr. Mark P. Rutten, Chief Samuel O. Bolarinde, Dr. Obadiah Mailafia and Mrs

    Ndidi O. Nwuneli were appointed as Directors.

    Table 1: Current Directors

    Chief Kolawole B. Jamodu (CFR) Chairman

    Mr. Nicolaas A. Vervelde Managing Director/CEO

    Mr. Mark P. Rutten Finance Director

    Mr. Franco Maggi Marketing Director (effective 1st September 2015)

    Mr. Hurbert I. Eze Sales Director

    Mr. Victor Famuyibo Human Resources Director

    Mr. Hendrik A. Wymenga Technical Director