SUPERNEWS

Macro

Heineken's Nigeria Breweries Closes 2 Plants Amid $94M Loss

Heineken's Nigerian Breweries closes two factories amid naira depreciation, joining multinationals facing severe forex challenges.

By Jack Wilson

ᐧ

4/17, 09:01 EDT
S&P 500
iShares 20+ Year Treasury Bond ETF
iShares 7-10 Year Treasury Bond ETF
GSK plc
Procter & Gamble Company
article-main-img

Key Takeaway

  • Heineken's Nigerian unit closes two plants amid currency depreciation, joining other multinationals in restructuring due to increased costs.
  • Nigerian Breweries faced a 106 billion naira loss in 2023, planning a 600 billion naira capital raise to manage foreign-currency debts.
  • Nigeria's naira devaluation and economic challenges impact major firms, with Nestle Nigeria and MTN Nigeria also reporting significant losses.

Currency Crisis Hits Nigerian Breweries

Heineken NV's Nigerian unit, Nigerian Breweries Plc, has temporarily closed two of its nine factories in Nigeria, a move driven by the severe depreciation of the naira. This currency devaluation has escalated operational costs and significantly reduced the purchasing power of consumers, impacting the company's ability to maintain its full scale of operations. The company, known for producing popular beverages like Star lager and Legend Extra Stout, is now in discussions with unions to address the impact on workers, promising "strong support and severance packages to all affected."

Multinationals Rethink Nigerian Operations

The challenges faced by Nigerian Breweries are not isolated. Other multinational corporations, including Procter & Gamble Co., GSK Plc, and Bayer AG, have also had to reconsider their presence in Nigeria. The common thread among these companies is the struggle with the naira's weakness, which has led to a surge in prices and eroded consumer purchasing power. This economic environment has forced companies to either revamp their business models or exit the market altogether.

Financial Strain Under Economic Pressure

Nigerian Breweries reported a staggering loss of 106 billion naira ($94 million) in 2023, attributing it to a mix of economic challenges such as increased operational costs, inflation, and foreign exchange (FX) volatility. The company's decision to raise 600 billion naira in fresh capital from shareholders aims to address foreign-currency denominated obligations, following a significant foreign-exchange loss of 153 billion naira that heavily impacted shareholder equity. This financial strain is reflective of broader economic issues in Nigeria, where companies like Nestle Nigeria Plc and MTN Nigeria Communications Plc have also reported substantial losses due to finance costs and foreign-exchange losses.

Management Quotes

  • Hans Essaadi, Managing Director of Nigerian Breweries:

    "The tough business landscape characterized by double-digit inflation rates, naira devaluation, FX challenges and diminished consumer spend has taken its toll on many businesses, including ours. This is why we have taken the decision to further consolidate our business operations for efficient cost management."