Leading drug maker Fidson reversed previous year losses in a profit-making 2019 where moves by the company to deleverage its balance sheet and cut the high cost of borrowing, coupled with improved cost efficiency, helped offset lower sales.
Fidson made a profit of N407.19m compared to a loss of N97.45m 2018.
The drugmaker blamed its revenue and profit woes in 2018 on an increase importing raw materials, Nigeria’s port congestion and Naira devaluation, all of which, he said the impact on operating costs that could not be passed to consumers.
The company also faced a high cost of borrowing which ate into its profits.
Finance costs eroded 94% of operating profit of Fidson in 2018 contributing directly to its first loss in at least five years.
This prompted Fidson to take steps in ensuring that cost pressures especially borrowing cost were reduced.
The company said plans were in top gear to reduce energy cost by moving from diesel to gas-fired power generators, introducing new products and cutting out middlemen.
The company also announced a right issue to inject fresh N3billion capital of which about 38% would be deployed as working capital and the remaining N1.8 billion would go towards paying off parts of its most expensive debts.
Fidson as at the time of announcing its Right Issue had an N6.1bn and planned to pay down lease facilities worth N223m obtained separately from Financial Derivatives and Frontline, overdraft of N541m obtained separately from FSDH, FCMB, GTBank and Access Bank, and roughly N1bn of Import Finance Facility from independently from FCMB, GTBank, Access Bank and FSDH.
In all, N1.817bn worth of loan was planned to be taken off the company’s balance sheet.
As at the end of 2019 the company’s result showed a decline in the current and non-current portion of all existing interest-bearing loans and borrowings, although new liabilities pushed total 8% higher to N6.3bn.
Finance cost of the company fell about 10% to N1.74bn which is 77% of operating profit versus 90% in the previous year, thus aiding a return to profit path.
Interest on bank loans declined 6% to N1.58bn and interest on bond slumped 62% to 51.77m, while interest on lease loan fell 4% to N105.87m.
The year however saw continued a double-digit slide in sales by 13% to N14bn, as all business segments experienced a slowdown.
Consumer Unit was the worst-hit business segment, plunging by as much as 97% in the year. The business unit introduced in 2016 represents household items and contributed less than half-a-percent to total revenue.
On the other hand, Ethical segment for sales of drugs, injectables and infusion, remained dominant despite a 13% slowdown as it contributed 56% of total revenue.
The third segment Over-the-Counter sales of drugs decline 13% to contribute 44% to overall revenue.
Cost of sales fell 21% thanks to better cost management across all business segments and a 29% cut in energy cost and a 43% decline in factory overheads in the year.
This meant Fidson earned roughly N44 from every N100 sales which is higher than N40 made per N100 in 2018.
Overall, addressing its pain points has helped Fidson bounce back, but there is revenue has slowed down.
With Fidson’s state-of-the-art factory in Ogun State and increased capacity utilization, the company is positioned to enjoy from renewed government interest in local drugs manufacturing following the outbreak of the novel coronavirus.
Fidson was the first beneficiary of a N100bn healthcare intervention fund by the Central Bank of Nigeria.
Governor Godwin Emefiele in March told journalists that from the N100bn health sector facility, the bank had approved for Fidson Healthcare N2.5 billion to expand its plant into the production of ethical drugs and intravenous.
This support would provide capital for expansion of Fidson’s activities and lift outlook for the Pharmaceutical and Health Sector which according to indications have become top priorities for Nigeria going forward.
In the first quarter of 2020 Chemical and Pharmaceutical Products GDP grew 0.58% year-on-year compared to 0.92% in Q4 and 1.66% in Q1 2019.
Health and Social Services grew 1.06% versus 0.56% in Q4 and 0.16% in Q1 2019.
The broader economy surprised with a 1.87% growth in the quarter.
Fidson in History
Started as a local distributor of pharmaceutical products in 1995, barely a year after Fidson moved into the importation of its own brand of finished medicines. Determined to make an impact on Nigeria’s growing population, Fidson set up its first local manufacturing facility in July 2002.
In March 2005, Fidson became the first company in sub-Saharan Africa to manufacture Antiretroviral (ARVs) drugs. In February 200, Fidson set up a second manufacturing facility and ceded the former manufacturing facility to an international joint venture project, which led to setting up of Ecomed Pharma Limited.
Fidson currently runs a Current Good Manufacturing Practices (CGMP) compliant manufacturing facility and are one of a few Nigerian pharmaceutical manufacturers that are candidates for the WHO GMP certification.
The GMP certification is the aspect of quality assurance that ensures that medicinal products are consistently produced and controlled to the quality standards appropriate to their intended use and as required by the product specification.
Fidson’s shares were quoted on the floor of the Nigerian Stock Exchange on June 5, 2008. As of December 31, 2018, the issued share capital is held 38.86percent directly by its directors and 5.74percent indirectly by directors while 54.94percent by the investing public.
The company realises its revenue from the sale of Ethical Products, sale of Over the counter drugs and sale of paper products and diapers.
Fidson shares have gained 39% in the last one month and are trading at N3.4 a unit, the highest since early December 2019.
Leadership
Fidelis Ayebae, a 1976 graduate of civil engineering from the Mainland Institute of Technology is the founder, CEO & MD. Fidelis has worked in various capacities with a number of organizations among which is CitiBank Limited.
As of December 31, 2018, Fidelis owns a 35.44percent stake in the healthcare company. He also doubles as the chairman of Nem Insurance Plc and as of December 31st, 2018, Fidelis owns a total of 24.37million units of shares in the insurance company. He is an Associate of the Chartered Institute of Administration and also a member of the Nigeria Institute of Management. His wife, Funmilola is a non-executive director of the company.
Other non-executive directors include Emmanuel E. Imoagene, Mabel Ndagi, and Segun Adebanji, who is the chairman.
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