International Breweries Plc is advancing plans to eliminate the accumulated losses that have kept its retained earnings negative since 2019. The company announced a share capital reduction strategy, which will be proposed for shareholders' approval at its forthcoming annual general meeting (AGM), according to a statement released on Thursday.
Strategy to eliminate negative retained earnings
The brewer stated that it is proposing to reconstruct the company's share capital by eliminating negative retained earnings and returning excess capital to shareholders. The transaction will be executed under Section 131 of the Companies and Allied Matters Act, 2020 (as amended), subject to regulatory approval and confirmation by the Federal High Court.
Following the announcement, shares in the brewer surged by 10 per cent, the maximum daily gain allowed by the Nigerian Exchange (NGX), at market close.
First profit in seven years but legacy losses persist
International Breweries, Nigeria's second-largest brewer, reported its first profit in seven years in 2024, after majority shareholder AB InBev took over in 2016. However, the company's balance sheet remained burdened by legacy negative net losses from entities that merged to form the larger International Breweries under the new ownership. These losses were exacerbated by foreign exchange losses from a dollar squeeze during the Covid-19 pandemic and the impact of Nigeria's currency reforms between 2020 and 2024.
Accumulated losses reached N191 billion last year, creating a significant barrier to dividend payments. The company plans to allocate part of the balance in its share premium account to clear these losses, which will restore distributable reserves and improve prospects for declaring cash dividends to shareholders.
Return of excess capital after clearance
Once the negative retained earnings are cleared, International Breweries will consider further reducing the cash in the share premium account to facilitate a return of capital to shareholders. 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, the company added.
