The Nigerian Stock Exchange (NSE) has listed an additional 745 million units ordinary shares of Drug Maker, May & Baker Nigeria Plc issued by way of a Rights Issue.
The additional shares arose from company’s Rights Issue of 980 million ordinary shares of 50 kobo each at N2.50 per share on the basis of one new ordinary share for every one share ordinary shares held as at 4 September 2018.
Managing Director/CEO of May & Baker, Mr. Nnamdi Okafor, said the rights issue would further help to reduce finance costs, increase capacity and bring greater returns to shareholders.
Okafor noted that the net proceeds of the rights issue will be invested in some key projects including N400 million to finance part of the company’s equity in Biovaccines Nigeria Limited, the joint venture company for local vaccine production and over N500 million on capacity expansion for one of its cash cow products, paracetamol for which it is building a dedicated plant.
He added that the company will also use N400 million to offset part of its current loan portfolio of N950 million while N500 million will be invested in marketing and brand building.
It would be recalled that the company in April 2007, had entered into a Joint Venture with the Federal Government to engage in the business of production, sale, and distribution of human vaccines. Under the arrangement, May & Baker is to have 51% interest in the Company by injecting N520 million in the entity while the Federal Government is to have 49%. And as at the 2017 financial year, the Company has only injected a 44% of the total investment cost due from them into the company. It also recently signed an agreement with the National Institute for Pharmaceutical Research Development (NIPRD) for the commercial production of NAPRISAN, an anti-sickle cell medication.
For major players in the Healthcare sector, it has been a tough operating environment. Factors such as the low purchasing power of Nigerians means many could not afford the drugs from these companies and now prefer to patronize cheaper traditional drugs, the porous nature of the nation’s border has made smuggling of unregistered drugs a thriving business, and in some situations counterfeiting locally. Drug makers are also finding difficult to move goods to the northern part of the country as activities of insurgents in that region heightens.
Interestingly despite all these challenges, players in Healthcare had an impressive outing last year. A look at May & Baker’s Q3 result for the period ended 31 September 2018 shows revenue declined marginally by 5% from N6.9 billion in 2017 to N6.5 billion in 2018. Profit Before Tax grew by 89% from N322 million in 2017 to N609 million in 2018. The result from its revenue segment also shows that revenue from its Pharmaceutical segment surged by 8% from N5.8 billion in Q3 2017 to N6.3 billion in 2018, Revenue from its Beverages segment- This segment is involved in the production of bottled water (Lilly), grew by 11% from 46.5 million in Q3 2017 to 52.02 million in 2018.
Retreat on its Food segment
When May & Baker decided in 2006 to expand into the manufacturing of consumer foods away from its norm of drug manufacturing, many industry watchers see it as a perfect move. Moreso, the decision came at a time when the fast moving consumer goods (FMCG) market in Nigerian was full of opportunities and every player wanted a ‘share in the largess’. Companies already in the FMCG expanded their product lines to accommodate more products.
Interestingly May & Baker was not the only drug manufacturer that deviated into the consumer foods manufacturing, GlaxoSmithKline (GSK), another player in the drug manufacturing business was successfully combining its booming beverages lines with an equally successful pharmaceutical production outfit.
But the business clime has changed a lot since then. The fall in oil prices and the ensuing economic contraction that hit Nigeria ravaged the economy in ways not seen since the eighties. Manufacturers have to scramble for scarce foreign exchange and consumers, whom consumer food players had targeted, changed their consumption patterns. Everyone was left with no other choice than to make a retreat.
May & Baker decided to sell off its food line (Production of Noodles) to Dufil Nigeria Limited for ₦775m. The 100% acquisition was finalised on April 26th following the fulfillment of all necessary conditions, which include gaining the approval of both companies’ Boards of Directors, their respective shareholders, and the Nigerian Stock Exchange. Also, GSK, makers of the popular Lucozade and Ribena was sold off to Japanese maker Suntory in 2016.
May &Baker’s Mimee Noodles brand could not compete with Dufil’s Indomie which controls more than 50% of the market share. The intense ‘battle’ in the market segment affected the brand’s ability to generate enough revenue in order to supplement the parent company’s annual profits. This is despite the huge capital that had been invested in it.
In the company’s 2017 financial year report, the food arm contributed ₦1.3 billion to a full year revenue of ₦9.35 billion. This is less than the ₦2.11 billion that was realised in 2016. Prior to that, the company generated ₦2.03 billion from the subsidiary in 2015.
Going Forward
The company realised about N1.86 billion from the just concluded rights issue as it was 76.04 percent successful. With the rights issue, May & Baker now has another round of capital for its expansion projects and that would, in turn, boost its revenue base. Hopefully, it will continue to receive patronage from Government agencies. Also, the impact of the Chairman, a Former Minister of Defence Lt.Gen T.Y. Danjuma (rtd) cannot be overemphasized. Shareholders and industry watchers are hoping that the Nnamdi Okafor led management team will continue to drive the drug company on the path of profitability.
May & Baker Nigeria Plc was incorporated in 1944 as Nigeria’s first pharmaceutical company. It has its origin in England, the United Kingdom in 1834, three chemists founded Grimwade, May & Pickett, a firm for manufacturing chemicals for pharmaceutical products.
Formerly known as May & Baker (West Africa) Limited, the company was a trading outpost to serve the West Coast of Africa. In 1976, it built its factory at Ikeja where it began local manufacturing of pharmaceuticals. That same year it changed from May & Baker (West Africa) Limited to May & Baker Nigeria Limited.
May & Baker Nigeria Limited became a publicly quoted company following its listing by introduction on the Nigerian Stock Exchange (NSE) on November 10, 1994, and became May & Baker Nigeria Plc.
OLUFIKAYO OWOEYE
