Nigeria: Champion Breweries to float a fresh batch of shares in Q1 2025

Champion Breweries, the brewer behind the production of Champion lager beer and Champ Malta, is set to tap into the investing public’s appetite for a slice of its success story, as it prepares to float a fresh batch of shares on the Nigerian Exchange Limited (NGX) in the first quarter of 2025, Businessamlive reported on October 16.

The move was announced at a recent “Fact behind the Figures” event held at the NGX headquarters in Lagos, where the company laid out its plans to ensure its portfolio is running on all cylinders.

In his presentation, Inalegwu Adoga, managing director of Champion Breweries, explained that the company’s recent decision to issue new shares aims to tackle the persistent free-float deficiency problem and raise funds to enhance production capacity, allowing the brewery to cater to the unmet demand from their current customer base.

“Over the years, we have been having a free float requirement deficiency which has put us at the risk of being delisted from the Exchange. However, to address this, we engaged with the NGX and through their kind consideration and support, we have been able to come up with a compliance plan which has a targeted timeline of Q1 2025. And within this period, we shall be engaging in share divestment to the retail market by way of a Public Offer,” he stated.

Champion Breweries, a major player in Nigeria’s brewing sector, reportedly has a free float of just 3.58 percent, which is well below the minimum requirement of 20 percent for companies on the mainboard.

Discussing the untapped potential of the brewery, Adoga pointed out that despite the company’s regional focus on markets in Akwa Ibom, Imo, Enugu, and Cross River States, they have been unable to fully capitalise on the existing market demand due to limited production capacity.

Determined to make the most of this opportunity, he shared the company’s plan to engage with key firms, such as Rand Merchant Bank, FBN Quest, Africa Prudential, PWC,Banwo & Ighodalo,amongst others who will provide essential proclaimer services to help the brewery leverage its resources, expertise, and networks to exploit the full potential of the market.

Sharing key financial metrics at the event, Rasheed Adebiyi, the chief financial officer (CFO) at Champion Breweries, revealed that the company’s net profit stood at N370 million for the financial year, marking a 74 percent decline from the previous fiscal year’s N1.41 billion. The company’s net profit margin also slid from 11 percent to 3 percent.

However, Champion Breweries held its ground, emerging as a bright spot in the sector by outperforming its peers, who couldn’t escape the red ink during the financial year.

Adebiyi explained that even in the face of headwinds, Champion Breweries displayed efficiency in generating returns on equity, generating a positive ROE of 3 percent, setting it apart from its competitors in the breweries industry, who saw negative returns on equity for the fiscal year 2023.

Champion Breweries also announced a strong revenue growth of 68 percent, reaching N14.02 billion in nine months 2024, compared to nine months 2023.

In a season marked by volatility and uncertainty, Champion Breweries bucked the trend and remained profitable, largely thanks to what Inalegwu Adoga, the MD referred to as “raw materials hedging”.

Adoga revealed that the company had anticipated the choppy waters ahead and hedged against raw material price instability by securing a stable supply arrangement of its key ingredients well in advance.

According to Adoga, the company’s outlook remains positive despite current economic challenges. This is as Nigeria continues to be the largest market for alcohol consumption in Africa, with beer and spirits being the most consumed alcoholic drinks.

Adoga stated that the company’s awareness of the economic landscape allows it to maintain a positive outlook, and he believes that the core addressable population in Nigeria is still one of the highest in Africa, which provides them with a strong consumer base.

“In spite of the fact that our household income may be lower than that of other countries, in terms of the core addressable population that we serve our products, it remains one of the largest and when you look at also the alcohol industry in terms of beer and spirits, we still see very significant growth.

Between 2019 and 2023, the beer industry (compounded annual growth) has grown by 3.1 percent, while that of Spirits is 3.7 percent. So, the outlook is positive,” he said.

Adoga also observed that despite the adverse economic climate, food and beverages remain vital staples in Nigeria’s daily life. He noted that though the total food and beverage consumption per person is lower than in countries such as the United States, the percentage of food and beverage expenditure consumed at home is high, at 59 percent.

“What is the implication of this? We can implement moderate price increases without losing demand and the steep demand continues in spite of low consumption expenditure. We also see opportunities in scale of economics as capacity expands.

“Champion Breweries maintains a claim as a sole locally owned listed player in the industry dominated by multinational breweries. We all are familiar with the fact that the bigger players in our sector all have foreign investments.

“We may be smaller compared to these big players. However, we have established beverage brands with over 50 years’ experience and we have demonstrated our resilience over the years. And the fact that we keep innovating to bring new products into the market makes it very critical to pay attention to our performance in the next two years.

“While other players in the industry where we operate had negative profit figures, it was only Champions Breweries that recorded a positive figure, and this is despite the macro economic and industrial headwinds that we had to face,” he stated.

The Champion Breweries’ MD, who delivered a compelling case for investing in the company, highlighted its commitment to creating shareholder value through a focus on profitability, efficiency, and growth. He also reiterated Champion Breweries’ status as the only publicly traded Nigerian brewery brand to report profits in 2023.

Adoga underscored the company’s commitment to cost efficiency through investing in renewable energy solutions and net-zero technologies, which will help the company reduce its carbon footprint and contribute to a more sustainable future.

Offering a reassuring voice concerning the company’s strategic direction, Imo-Abasi Jacob, the chairman of the Board at Champion Breweries, underscored Champion Breweries’ resilience and commitment to its shareholders and stakeholders.

Jacob reiterated that, despite the challenging economic conditions, the company remains undeterred in its pursuit of long-term success and profitability.

“Our focus on operational efficiency, cost reduction, and market expansion reflects our determination to deliver sustainable value and growth. We are confident that with our renewed leadership and strategic initiatives, Champion will continue to thrive as a significant player in Nigeria’s beverage industry,” he said.

Amidst the discussions on the company’s performance and resilience, the event presented Champion Breweries’ new strategic course under the stewardship of EnjoyCorp Limited, a core shareholder of the company.

David Butler, the managing director of EnjoyCorp, also graced the event, bringing his expertise to the table as a director on Champion Breweries’ board.

17 October, 2024