International Breweries plans to reduce shares to clear losses

International Breweries is making plans to tackle the big losses it has faced over the years. These losses have kept its retained earnings in the negative since 2019.

The main part of the plan is to reduce share capital. The beer company wants to do this after getting approval from shareholders at its upcoming annual general meeting. This was shared in a statement on Thursday.

“The company is proposing to reconstruct the company’s share capital by way of 1) eliminating negative retained earnings; and 2) the return of excess capital,” International Breweries stated in a note to the Nigerian Exchange.

“The transaction will be executed pursuant to the provisions of Section 131 of the Companies and Allied Matters Act, 2020 (as amended), subject to the appropriate regulatory approval and confirmation by the Federal High Court,” the company added.

Shares in the brewery jumped by 10 percent, which is the maximum daily gain allowed, at market close after the announcement.

The company, which is Nigeria’s second-largest brewer, reported its first profit in seven years last year. This came after AB InBev became the majority shareholder in 2016.

The impact of past negative losses from companies that merged to create a bigger International Breweries, along with foreign exchange losses during the Covid-19 pandemic, made things tougher. Nigeria’s currency changes from 2017 to 2024 also added to the problems.

Accumulated losses reached ₦191 billion last year. This has made it hard for the company to pay dividends. To fix this, the company announced it will use part of its share premium account to clear these losses. This move aims to help restore distributable reserves and improve chances of giving cash rewards to shareholders.

Once the negative retained earnings are cleared, International Breweries will consider reducing the cash in the share premium account further. This will help return capital to shareholders, according to the company.

“The amount payable per ordinary share will be distributed on a pro rata basis, determined with reference to the total amount approved by the Board of Directors for distribution from the share premium account,” it added.