• Wednesday, April 17, 2024
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Neimeth: Sustaining upward trajectory

Neimeth eyes N3.67bn from ongoing rights issue

Neimeth International Pharmaceuticals Plc has sustained continuous growth in key performance indicators over the years.

Stable growth in business has seen the company restarting and sustaining dividend payment to shareholders.
With 317 percent growth in net profit in six years, expansive plan to bolster capital and attain global manufacturing certification, Neimeth further strengthens position as a leading pharmaceutical company.
The company recorded growths in all key performance indices in 2021 with 27 percent growth in net profit. The continuous improvement in profitability over the past four years enabled the company to increase dividend payout for the 2021 business year, a recommendation that was enthusiastically approved by the shareholders of the company.

The financial scorecard

The audited report and accounts of Neimeth International Pharmaceuticals for the year ended September 30, 2021 showed that gross turnover hit a high of N3.05 billion in 2021 as against N2.84 billion in 2020. Top-line analysis showed that the company’s human pharmaceutical manufacturing business grew by 13 percent from N2.5 billion in 2020 to N2.8 billion in 2021. Operating profit rose from N510.15 million to N553.5 million in 2021. With increasingly effective cost management, the bottom-line expanded considerably. Profit before tax rose by 23 percent from N297.39 million in 2020 to N365.29 million in 2021. After taxes, net profit grew by 27 percent from N212.48 million in 2020 to N270.58 million in 2021. With this, earning per share rose correspondingly by 27 per cent from 11 kobo in 2020 to 14 kobo in 2021. Underlying ratios also showed that the outward growth was driven by intrinsic improvement in the core operations of the company. Operating profit margin improved from 17.96 percent in 2020 to 18.15 percent. Pre-tax profit margin also increased from 10.46 percent in 2020 to 11.98 percent in 2021. `
Over a six-year period (between 2016 and 2021), the company has shown steady growth trajectory with consistent year-on-year growth in sales and profitability.

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Over the period, turnover has grown by 52 percent. Pre-tax profit has grown by 284 percent. Profit after tax has risen by 317 percent. One of the major factors contributing to enhanced profitability over the past few years is management’s consistent focus on absorption of plant operations overhead. Overhead consists of relatively fixed costs of the plant which must be absorbed by production outputs and if not will become major losses in the business. The 2021 report indicated the highest overhead absorption of N378 million, which was 24 per cent better than the overhead absorption for 2020 financial year at N305 million. The 2021 overhead absorption was also the highest absorption in five years when compared with the other years ranging from N164 million to N289 million. So, it wasn’t mere coincidence that 2021 with the highest overhead absorption also had the highest pre-tax profit of N365 million while 2017 with the least overhead absorption recorded a major loss. The company has consistently recorded profit in the past four years, thereby ending the era of losses that bedeviled the company in the past. Both the turnover and profit grew year-on-year consistently over the four-year period with exception of 2020 financial when there was slight dip against prior year, due to huge foreign exchange loss occasioned by macroeconomic woes caused by COVID-19 pandemic.

Increasing shareholders value

Neimeth increased dividend payout by eight percent to 7kobo for the 2021 business year, sustaining the trend started in 2020 when the company paid a dividend per share of 6.5 Kobo; after it had earlier successfully used its profit to restructure its balance sheet and counterbalanced earlier losses. Beyond cash dividend payouts; shareholders of Neimeth have seen significant capital gains as the investing public continued to react positively to the improvements in the company’s fundamentals. The share price of Neimeth increased from 40 kobo as at September 30, 2019 to N1.75 by the year ended September 30, 2021, representing a 338 per cent gain, more than an average of 100 per cent gain per annum. Neimeth’s share price closed on Thursday February 17, 2022 at N1.90 per share, representing 375 per cent gain over 2019. This implies that a shareholder who had N1 million worth of shares on September 30, 2019 has seen his value rise to N4.75 million.

Strong shareholder value creation recognised

Neimeth’s strong shareholder value creation has not gone unnoticed. In 2021, Neimeth won the 2021 Nigerian Investor Value Awards (NIVA 2021) organised by the Business Day Media Limited in conjunction with the Nigerian Exchange (NGX) for the category of “Best Performing Stock (Healthcare)”. It was also nominated as “Listed Company of the Year” along with FBN Holdings Plc and Airtel Africa Plc, ranking among the top three companies that created the most value for their shareholders out of about 160 listed companies on the Exchange.

Growth plan
Neimeth is pursuing a multi-pronged strategy to strengthen its position as a leading Nigerian pharmaceutical company and to develop a competitive global capacity that allows it to tap into emerging continental opportunities. As part of the expansion plans, the company is set to build a new manufacturing facility at Amawbia, Anambra State which will comply to World Health Organization (WHO) current standards of Good Manufacturing Practice (cGMP). It is also upgrading its Oregun factory which is billed to be completed this year. The Oregun factory upgrade is expected to increase Neimeth’s manufacturing capacity by more than 300 per cent, particularly of liquid products. This will enable the company to grow more rapidly in both turnover and profit. Amawbia project is also expected to have reached advanced stage of implementation by the end of the current financial year and is expected to contribute to the next business year in 2023.

Also; in pursuit of its corporate vision to be the leading innovative healthcare provider out of Africa, the company is pioneering research and development of African home-grown solutions to various diseases. Already; it has many therapeutic formulations that will provide solutions to various human and animal diseases. Neimeth is also partnering with overseas pharmaceutical companies to formulate medicaments for various common ailments on the continent. Currently; it has about 13 different human pharmaceutical lines undergoing registration while about nine veterinary products are underway. About 25 other human pharmaceutical products are scheduled to be submitted to the National Agency for Food and Drug Administration and Control (NAFDAC) for registration soon. Most of these products are expected to be introduced into the market in the current business year, thus expanding the company’s product portfolio.
Already, shareholders of Neimeth have approved the plan by the company to raise N5 billion through a hybrid offer of rights to existing shareholders and private placement. The company will raise N3.67 billion through rights issue at N1.55 per share and N1.32 billion through private placement at N2.10 per share.

Ambrosie Orjiako, Chairman of the Board of Directors of Neimeth International Pharmaceuticals said the money is being raised for three key reasons. First, is the construction of a World class factory compliant to World Health Organisation (WHO) current Standards of Good Manufacturing Practice (cGMP) at Amawbia in Anambra State. Second is the completion of the on-going facility upgrade at the Company’s Oregun factory and thirdly to boost working capital.

Also, Matthew Azoji, Managing Director of Neimeth International Pharmaceuticals said the capital market is the most viable and cheaper option to source long term funds because of the high cost of funds through other sources. “We cannot finance long term projects with short term funds from banks. That will not be expedient and cost effective. It will also not serve the best interest of shareholders” He explained that the company considered prevailing economic situation in the country that also affect shareholders before deciding to add the private placement equity. “We did not want to put the entire burden of N5 billion on shareholders, that is why we have decided to add private placement to the fund raise,” he said.