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May and Baker Nigeria Plc’s efforts to harness the potential of recent investment and cost control mechanism has yielded fruit as the drug maker was able to turn each Naira invested in sales into higher profit.
The company’s stellar performance in the period under review amid a tough and unpredictable macroeconomic environment validates its growth strategy.
For the year ended December 2017, May and Baker’s gross profit margin increased to 34.84 percent from 30 percent the previous year; thanks to improved efficiency and focus strategy.
Cost of sales ratio declined to 64.91 percent in December 2017 from 70.0 percent the previous year. This means the company has spent less to produce each unit of product.
Earnings before interest and tax (EBIT) margins followed the same growth trajectory as it increased to 12.83 percent in the period under review as against 9.69 percent the previous year.
A 12 percent profit indicates the drug maker earns 12 kobo in profit for every Naira it collects.
May and Baker’s implementation of many growth initiatives are paying off as investors continue to buy into its stock, signaling they are upbeat that the company’s aggressive expansion plans will magnify their earnings.
The drug maker’s shares have gained 23.08 since the start of the year, outperforming the Nigerian Stock Exchange (NSE) All Share Index (ASI) of 6.79 percent.
Last year, the Federal Ministry of Health signed a Memorandum of Understanding (MOU) with May and Baker for the production of vaccines under the Public Private Partnership by 2019.
The ministry stated that the country would need $738 million for vaccines in 2014, 2017 and 2018.
Analysts say they expects investors to swoop on the drug maker’s stocks given an array of projects in the pipe line that are expected to trickle down to the bottom line (profit). They added that they expect further margin expansion by the time these copious investments crystallize.
Despite the tough and unpredictable macroeconomic, May and Baker posted a profit after tax of N370.86 million in December 2017 as against a loss N41.09 million it posted the previous year.
Sales increased by 10.05 percent to N9.35 billion in the period under review while gross profit spiked by 29.24 percent to N3.27 billion in December 2017 from N2.53 billion as at December 2016.
The year 2016 was horrendous for May and Baker and other drug makers in the country as a severe dollar scarcity brought on by lower oil price hindered them from importing raw materials to meet production.
In short the country slipped into its first recession in 25 years that same year as drugs on the shelves of pharmaceutical stores shrank.
However, the introduction of the new foreign exchange window by the central bank in mid 2017 coupled with the rebound in crude oil price and production saw the country exist a recession.
The gross domestic product of Africa’s largest oil producer expanded for three straight quarters last year after a 1.6 percent contraction in 2016, with year-on-year growth reaching 1.9 percent in the final three months of 2017.
The above gradual economic recovery means May and Baker’s future profit will get a boost as the availability of dollars will enhance its ability to import plants and raw materials.
Shareholders and investors should expects a higher returns on their investment as the inauguration of the board of Biovaccines Nigeria Limited, (a subsidiary of the company), has raised the prospects that the subsidiary will soon begin to impact positively on the group performance.
The company’s world-class manufacturing facility in Ota, Ogun State, is fast growing into a hub of pharmaceutical manufacturing in West Africa; the imminent commencement of operations by Biovacccines Nigeria Limited will open up a new vast vista of growth for the group.
The board of directors of the company has recommended distribution of N196 million as cash dividend for the 2017 business year, representing a dividend per share of 20 kobo.
BALA AUGIE
