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New products pipeline drives Neimeth Q1 performance as revenues up 40%

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Background

Neimeth International Pharmaceuticals Plc is the resultant company from the Sam I Ohuabunwa led Management-Buy-Out of the 60 percent equity holding of Pfizer Products Plc. This Management-Buy-Out took place in May 1997 when Pfizer Inc. in pursuit of its global repositioning strategy, divested 60 percent equity in Pfizer Products Plc. in favour of the existing management.

Before the brand name change to Neimeth International Pharmaceuticals Plc, the company had operated in Nigeria for 40 years, manufacturing, marketing and distributing Pfizer brands of pharmaceutical products in tablets, capsules, ointments and oral liquid forms.

During the 40 year period (1957 – 1997), the company established the first pharmaceutical manufacturing plant in Nigeria at Aba. It then set up and opened the most modern pharmaceutical plant in the West African sub region in 1976 at Oregun, Lagos.

Financial Performance for Q1:2014

Neimeth International Pharmaceutical Plc has posted its Q1:14 results which showed the company recording an impressive top and bottom line performance.

In the period Q:14, the company grew gross revenue by 40 percent to N468.53 million compared with N335.60 million in same period of prior year(Q1:13) .

Gross profits were up 23.37 percent to N257.47 million in Q1:14 as against N208.69 million in Q1:13, while gross profit margin in the review period slid to 54.95 percent from 62.23 percent same period of prior year of 2013.

The decline in the above margin may have arisen as a result of increase in cost of sales by 67 percent year on year (y/y)  to N211.06 million in 3M14  from N126.61 million in 3M13 thus cost of sales margin jumped to 45.04 percent in Q1:14 from 37.76 percent in Q1:13.

Distribution/administration and other expenses in the period Q1:14 remained flat at 1 percent y/y to N163.86 million compared with N162.88 million in the same period of prior year (Q1:13) hence operating margin (Opex margin) reduced to 35 percent from 48.57 percent in Q1:13.

Profit before tax (PBT) in the first quarter of 2014 surged by 163 percent y/y to N75.76 million  compared with N28.81 million in the same period of prior year (Q1:13)

Earnings per share EPS soared by 200 percent to 6k from 2k in Q3:13.

Excellent price policy and the ability to withstand intense competition from rival companies have improved profitability as net profit margin climbed to 20.08 percent in Q1:14 as against 13.67 percent in Q1:13.

Neimeth’s total assets were flat at N2.89 billion in the review period, while net assets increased by 5 percent y/y to N1.87 billion in Q1:14 compared with N1.78 billion in Q1:13.

The Return on Average Equity ROaE climbed to 4.04 percent from 1.61 percent for Q1:13, while Return on Average Assets ROaA rose to 2.62 percent from 0.99 percent for Q1:13.

The company is in satisfactory position to meet its short term obligations as at when due as current ratio in the review period rose to 2.83x from 2.6x in the corresponding period of 2013- the figure is above the industry average of 2.1x

Total debtor and other receivables which makes up 60 percent of total assets were up 10 percent y/y to N1.74 billion in Q1:14 from N1.56 billion in the same period of prior year (Q1:13).

Share performance and Outlook

The share price of Neimeth has increased by 76.74 percent in the past year to close at N1.52 -March 24-, 2014 on the floor of the Nigeria Stock Exchange (NSE).

The company has a market capitalization of N2.38 billion on the same day. It also has a price to book ratio (PBR) of 1.11x and a price to sales ratio (PSR) of 0.98.

Current P/E Ratio was 15.2x and relative P/E Ratio vs. NGSEINDX was 1.12x.

BALA AUGIE