The national scale issuer ratings of BBB+(NG)/A2(NG) have been assigned to Champion Breweries Plc by GCR Ratings.
In a statement obtained by Business Post, GCR noted that it also gave a stable outlook to the brewer because it foresees the brewery firm remaining profitable and sustaining strong gearing and liquidity metrics despite the expected rise in debt.
However, it emphasised that its rating could be downgraded if the organisation experiences a higher-than-expected rise in debt which leads to a deterioration in leverage metrics and creates refinancing risk.
“Also, unfavourable working capital movement that places pressure on operating cash flow and weakens liquidity would negatively impact the ratings,” a part of the statement said.
The rating agency assured Champion Breweries that an upgrade could happen if there is an improvement in its business scale as well as better product and geographical diversification which supports robust cashflows.
Champion Breweries operates on a much smaller scale with current installed production capacity at 500,000 hectolitres per annum (hlpa) compared with other peers that can produce more than 5 million hlpa.
It has only two brands, Champion lager beer and Champ Malta, and operations are all within the Southern region of Nigeria with around 60 per cent of revenue generated from Akwa-Ibom state, but its favourable cost model has supported EBITDA margin above peer average.
The company has no interest-bearing debts, therefore, EBITDA coverage of interest has remained strong at above 10x over the five-year period to 2024.
But its debt is expected to rise due to plans to borrow N5 billion from the Bank of Industry (BOI) to part finance the acquisition of an empty bottle inspection machine and installation of a canning line.
Champion Breweries intends to ramp up capacity utilisation to 80 per cent in 2025 from 69 per cent in 2024 and drive volumes to underpin a further growth in revenue.
In the 2024 fiscal year, the organisation grew its earnings to N20.9 billion from N12.7 billion in the previous year due to higher volumes and upward price adjustments.
The brewer has remained profitable, especially due to its reliance on local supplies, helping to hedge against foreign exchange volatilities. Hops and barley are the company’s major inputs and they are mostly sourced from local suppliers rather than direct importation.
Champion Breweries is majorly owned by a non-operational company, Raysun Nigeria Limited.