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NB Shares Rise on Acquisition of 2 Breweries

19 Oct 2011

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By Goddy Egene

The share price of Nigerian Breweries Plc appreciated last week as investors reacted to the company’s recent acquisition of two breweries. In a week that the Nigerian Stock Exchange (NSE) All-Share Index fell by 1.8 per cent, shares in Nigerian Breweries rose by 4.9 per cent or N4.01 to close at N86.01 per share. The equity posted the highest price gain last week.

Market operators had said the increased demand for the   Nigerian Breweries might not be unconnected with investors’  high expectation over  the recent acquisition of Sona Systems Associates Business Management Limited  and Life Breweries Company Limited  by the company.

Sona Systems has two breweries in Ota Ogun State and Kaduna, respectively, Ogun State while Life Breweries in Onitsha, Anambra State..
Nigerian Breweries had informed the NSE that by virtue of the acquisitions,  both breweries  were its subsidiaries.

“The Sona Systems’ breweries in Ota and Kaduna as well as Life’s brewery in Onitsha have become part of the Nigerian Breweries family. Also, three brands, Goldberg (Lager), Malta Gold (Malt) and Continental Life (Lager) have been added to the brand portfolios of Nigerian Breweries,” the company  had explained.

Chairman of the company,  Mr.  Kola Jamodu,  had told shareholders  recently that the Sango Ota plant of Sona Breweries complemented  the company’s Lagos and Ibadan breweries, which he said were  already operating at full capacity and could  no longer be upgraded to meet growing demand.

Also, the other Sona Breweries in Kaduna and Life Breweries in Onitsha, he added, would further strengthen the company’s presence in the North and South-east of  Nigeria respectively.

Jamodu had explained that acquisition would enhanced revenue opportunities, improved operating efficiency and  lead to economies of scale, particularly in purchasing and distribution.

Speaking in the same vein, the Managing Director of the Nigerian Breweries, Mr. Nicolaas Vervelde, had said the alternative to acquiring the breweries to meeting growing demand, was  building a new brewery, which he said, would  have taken  a period of not less than 24 months.,
“The acquisition is therefore, a good business decision. Advantages of the Sona/Life breweries acquisition means immediate capacity to meet growing demands, expands our geographical coverage, reduces delivery cost and enhances economies of scale," he said.

Nigerian Breweries   posted a turnover of N185.862 billion for the year ended December 31, 2010, up from N164.206 billion in 2009. Profit before tax rose from N41.399 billion to N44.88 billion while profit after tax   stood at N30.332 billion, compared with the N27.91 billion in 2009. Shareholders received a total dividend of N2.10 for the 2010 financial year.

Things are already looking up for the Nigerian Breweries going by its half year results ended June   30, 2011. The company reported a profit before tax of N27.6 billion up from N23.3 billion, while profit after tax stood at N18.7 billion compared with N15.9 billion posted in the corresponding period of 2010.

Tags: NSE, Business, Featured, Nigeria, NB

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