The pressure from an unprecedented increase in input costs due to red hot inflation is taking a toll on the gross margin of May & Baker Nigeria Plc, BusinessDay has learnt.
The firm benefited from its pharmaceuticals business in the first half of 2022, with revenue reaching new highs in eight years. However, compared to the same period a year ago, the pharmaceutical company’s profit margin shrank by 278 basis points to 7.27 percent from 10.05 percent.
A profit margin is an amount by which revenue from sales exceeds costs in a business.
Analysts attribute the drug maker’s decrease in profit margin to rising input costs which claimed 69.42 percent of the total revenue generated in the period.
On account of inflationary pressures, worsening power supply, and supply chain disruptions in its business operations, the cost of sales reported by the company grew more than revenue by 56.6 percent in the first half of 2022 to N4.7 billion from N3.1 billion in the first half of 2021.
The pharmaceutical company’s revenue on the other hand grew by 22.6 percent in the first half of 2022 to N6.77 billion from N5.52 billion in the first half of 2021.
May & Baker generated revenue from its pharmaceuticals and beverages operating segment, each amounting to N6.70 billion and N12.5 million respectively in the first half of 2022.
The Group saw its distribution, sales, and marketing expense increase by 4.96 percent to N888 million in the first half of 2022 compared to N846 million reported in the first half of 2021.
Administrative expenses and interest income during the period also increased by 2.21 percent and 170.59 percent respectively to N554 million and N46 million.
The surge in interest income is primarily driven by the hawkish stance taken by the Central Bank of Nigeria (CBN). The company stated that “the interest income is earned on short-term investments (fixed deposits) with various commercial banks in Nigeria.”
Read also: May & Baker revenue surges to N11.9 billion, highest in four years
The CBN, in May, raised the monetary policy rate by 150 basis points to 13 percent from 11.5 percent in April citing the need to curb rising inflation in the country.
Its net finance costs, however, declined by 3.39 percent in the first half of 2022 to N114 million from N118 million in the corresponding period of 2021.
May & Baker’s total assets in the period under review were up 10.54 percent, amounting to N15.63 billion, as against N14.14 billion in the first half of 2021.
Its total shareholders’ equity amounted to N7.25 billion in the first half of 2022, up 6.93 percent from N6.78 billion in the first half of 2021.
Cash and cash equivalents, however, were down 25.15 percent in the first half of 2022 to N2.53 billion from N3.38 billion in the first half of 2021.
Net cash from operating activities surged by 464 percent to N1.8 billion in the first half of 2022 from N319 million reported in the first half of 2021.
Net cash used in investing activities during the period amounted to N709 million in the first half of 2022, an improvement from the negative net cash of N262 million reported in the first half of 2021.
The pharmaceutical company however reported negative net cash used in financing activities of N2.73 billion in the first half of 2022.
Earning per share reported by the company was down 11.34 percent to N28.54 per share in the first half of 2022 from N32.19 per share in the first half of 2021.
Consumer income has been bleeding profusely and they have been rationing to prioritize necessity in a country where over 50 percent of a population of 200 million people live on less than $1.98 a day.
