May & Baker Nigeria Plc is a Nigeria-based company, which is involved in the manufacture, sale and distribution of human pharmaceuticals, human vaccines and consumer products. The Company’s operating segments include Pharmaceuticals, Beverage and Foods.
Its Pharmaceuticals segment is involved in the production and sale of human pharmaceuticals and human vaccines. Its Beverage segment is involved in the production of beverage drinks, including bottled water. Its Foods segment is involved in the production of package foods, including noodles.
The Company offers pharmaceutical products for anti-diabetics, anti-hypertensive, anti-infectives, anti-malaria, analgesic, cough and cold, multivitamin and anxiolytics. Its anti-diabetic’s products are sold under Diatab and Diamet brands. Its anti-hypertensive products are sold under Cardovasc Retard and Ramitace brands. Its food products are sold under the Mimee brand. Its beverages sector is engaged in the bottling of Lily brand of table water.
The drug maker recently released its six month results for the period ended June 2018, showing improvement in profit, margins, sales and working capital.
Bumper return on investment awaits shareholders of May and Baker as the Federal Executive Council (FEC) has rectified its 12 year agreement with the pharmaceutical firm for local vaccine production.
The production of vaccines is expected to give impetus to sales while contemporaneously trickling down to the bottom line in form of higher profit and share price appreciation.
There are indications that the pharmaceutical firm may increase dividend payment to shareholders, thanks to a sure in distrbutable profit.
Net income surges 540 percent on improved contribution from segments
The drug maker released its six month June 2018 result showing a surge of 539.95 percent profit after tax to N601.37 million from N94.86 million the previous year.
Similarly, profit before tax spiked by 178.78 percent to N388. 90 million in June 2018 from N139.59 million as at June 2017 while earnings before interest and tax (EBIT) was up 23 percent to N587.24 million as against N452.24 million the previous year.
The growth in profit was largely driven by a reduction in finance cost, a drop in production and administrative costs and an item of N336.92 million, being income from discontinued operation.
Following shareholders’ approval at the Extraordinary General Meeting in November 2017 and approval by the Securities and Exchange Commission (SEC) in February 2018, the foods division of the business ceased operations and was subsequently disposed in April 2018. The profit of N336.92 million derived from the disposal relate to the excess of proceeds over the carrying amount of the assets at the date of disposal and the incidental expenses thereto.
May and Baker has been able to use increased sales in generating higher profit while utilizing shareholder’s resources in generating higher profit.
Increased efficiency, better cost management and improved business operations are responsible for the record profit margin.
Gross margin increased to 32.82 percent in the period under review as against 30 percent the previous year. This means the drug maker earns 33 kobo on the Naira in gross margin.
Net margin increased to 13.04 percent in the period under review as against 2.21 percent the previous year. A 13 pecent profit margin indicates the company earns 13 kobo, or N0.13, in profit for every Naira it collects.
EBIT Margin increased to 12.74 percent in June 2018 from 10.12 percent as at June 2017.
May and Baker’s cost control mechanism has paid off as it spent less in producing each unit of product amid a tough and unpredictable macroeconomic environment.
Cost of sales ratio reduced to 67.51 percent in June 2018 from 70 percent the previous year.The lower the ratio the more efficient and profitable a firm.
Cost of sales reduced by 0.96 percent to N3.09 billion in the period under review from N3.12 billion as at June 2017
Sales were up 3.13 percent to N4.60 billion in the period under review from N4.46 billion the previous year.
Business segmentation analysis showed that the performance of the company was driven by its core pharmaceuticals business, which saw 22 per cent growth in sales during the period. The company recorded improvement in sales in all its principal geographical business areas of Lagos, West, East and North.
The phamarceutical firm has a favorable leverage ratio, which means it is less susceptible to financial risk despite money spent on its aggressive expansion plans.
Time interest coverage ratio is 2.80 times operating profit, which means the company can meet its interest expenses obligation.
The interest coverage ratio is a debt ratio and profitability ratio used to determine how easily a company can pay interest on its outstanding debt.
The interest coverage ratio may be calculated by dividing a company’s earnings before interest and taxes (EBIT) during a given period by the company’s interest payments due within the same period.
The lower a company’s interest coverage ratio is, the more its debt expenses burden the company. When a company’s interest coverage ratio is 1.5 or lower, its ability to meet interest expenses may be questionable. 1.5 is generally considered to be a bare minimum acceptable ratio for a company and the tipping point below which lenders will likely refuse to lend the company more money, as the company’s risk for default may be perceived as too high.
May and Baker’s debt to equity ratio (D/E) ratio fell to 41.18 percent in June 2018 from 74.15 percent the previous year. This means the company has reduced the level of debt financing for its assets relative to equity in its capital structure.
Total borrowings (short and long term) reduced by 26.01 percent to N1.82 billion in June 2018 from N2.46 billion the previous year.
The drug maker could magnify dividend payout to shareholders as its distributable profit surged by 534.14 percent in the period under review
“It is noteworthy that the company achieved higher turnover in 2018 despite the discontinuation of a significant arm of its business responsible for about 20% of turnover in 2017,” said Nnamdi Okafor.
“These result have again demonstrated the long-term sustainability of the company’s growth strategy and the continuing efficiency of its world-class pharmaceutical manufacturing complex in Ota, Ogun State,” said Okafor.
According to him, the results showed that the group’s core business can sustain long-term value creation for shareholders even as it continues to explore additional opportunities for expansion of the core healthcare business in Nigeria and beyond.
Experts are upbeat that the gradual economic recovery, the relative flexibility in the foreign exchange market will spur May and Baker and its peer rivals to growth.
Nigeria’s gross domestic product expanded 1.95 percent in the three months through March from a year earlier, according to latest report from Abuja-based National Bureau of Statistics.
The introduction of the Investors’ and Exporters’ (I and E) Window by the central bank and a rebound in crude oil price helped the country exist its first recession in 25 years as firms can now access to foreign currency to import raw material and equipment to meet production.
“Our many growth initiatives are paying off and we are happy that the results have proved us right. With improvement in macroeconomic environment, we will continue to improve on our performance with a view to creating greater value for our shareholders,” Okafor said.
He noted that the impending commencement of operations of Biovaccines Nigeria Limited and ongoing efforts to turn the company’s world-class manufacturing facility in Ota, Ogun State, into a hub of pharmaceutical manufacturing in West Africa hold great prospects for the group. May & Baker Nigeria holds the majority equity stake of 51 per cent while the government holds 49 per cent equity stake in Biovaccines Nigeria Limited, the company set up for the purpose of May and Baker Nigeria-government partnership in domestic vaccine production.
Okafor said the company remains focused on improving its financial structure through injection of additional equity funds adding that stronger balance sheet and streamlining the company’s activities along its core area of healthcare will put it in a position to deliver higher profits in the future.
May & Baker Nigeria recently signed an agreement with the National Institute for Pharmaceutical Research and Development (NIPRD) for commercial production of anti sickle cell drug, NIPRISAN, after the Federal Executive Council (FEC) had ratified the Memorandum of Understanding (MoU) between NIPRD and May & Baker Nigeria.
NIPRISAN is an anti sicklling formula discovered by NIPRD researchers several years back. It is one of the few successful formulations that have been acknowledged to treat the sickle cell anaemia. Its commercialization in Nigeria is expected to substantially relieve the sickle cell disease burden which is responsible for the death of hundreds of thousands of people in the country yearly and has brought agony to many families.
Shareholders of May & Baker Nigeria had at its 2018 annual general meeting unanimously voted to increase the company’s authorised share capital from N1.9 billion of 3.8 billion ordinary shares of 50 kobo each to N3 billion of 6.0 billion ordinary shares of 50 kobo each. Shareholders also authorised the board of the company to sell or lease any one of the company’s two properties located at Sapara Street, Ikeja, thereby laying the ground for the company’s adequate capitalisation. Shareholders had in 2014 empowered the company to raise N3.2 billion new equity capitals.
Chairman, May & Baker Nigeria Plc, Lt. Gen Theophilus Danjuma (rtd), told shareholders at the meeting that directors of the company believe that the time is now right to raise the funds to enable the company harness new opportunities.
