Rating Release

Agusto & Co. affirms the “Aa-” rating assigned to Nigerian Breweries PLC with A Stable Outlook

The rating expires on 30-06-23

Agusto & Co. affirms the “Aa-” rating assigned to Nigerian Breweries PLC (“Nigerian Breweries”, “NBPLC” or “the Company”). The rating reflects our opinion on the Company’s improving ability to pass on cost increases to consumers, which should support margin growth, as well as its good cash flow, low leverage and expanding production capacity that should sustain its market leader status. Also, the rating represents an upward notching of NBPLC based on the strategic support from Heineken N.V. (“Heineken” or “the Group”), which we have considered as a credit enhancement given the strength of Heineken’s investment-grade ratings from two international rating agencies. However, the rating is constrained by Nigerian Breweries’ low profitability and inadequate working capital position. Given the intensifying cost pressures, we believe that the recent improvement in the pricing power and profit of local brewers could prove fleeting considering consumers’ decreasing discretionary spending.

Nigerian Breweries PLC is a member of Heineken N.V. – the world’s second-largest brewer – and remains a strategic subsidiary for Heineken’s dominance on the African frontier. The Company enjoys strong technical, administrative and financial support from the Group demonstrated through the huge credit lines used to support its foreign sourcing of input materials, packaging materials and spares. In a bid to grow the Company’s market share in Nigeria as well as take advantage of the trade opportunities presented by the African Continental Free Trade Area (AfCFTA), we expect the parental backing from Heineken to be sustained over the near to medium term.

The opinions expressed in this rating release do not represent any investment or other advice and should therefore not be construed as such. Visit www.agusto.com for further information.