Neimeth gets NGX approval for N3.67bn rights issue
The Nigerian Exchange Limited (NGX) approved the application for the listing of Neimeth International Pharmaceuticals Plc’s Rights Issue of 2,373,947,500 ordinary shares of 50kobo each at N1.55 per share.
The Rights Issue is for existing shareholders to purchase additional new shares in the pharmaceutical company on the basis of five (5) new ordinary shares for every four (4) ordinary shares held as at the close of business on Friday April 22, 2022.
Cordros Securities Limited is the stockbroker to the Rights Issue approved by NGX on May 23, while the issuing houses/financial advisers are: PAC Capital Limited; Mega Capital Financial Services Limited; and Planet Capital Limited.
The shareholders of the company had on March 22 approved Neimeth International Pharmaceuticals Plc to raise the sum of N5 billion through a hybrid offer of Rights to existing shareholders and private placement. The company will raise N3.67 billion through Rights Issue and N1.32 billion through private placement. The money will be used to finance major long term expansion projects.
“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,” said Matthew Azoji, Managing Director of Neimeth International Pharmaceuticals.
He had 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 N5billion on shareholders, that is why we have decided to add private placement to the fund raise,” he said
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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.
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 percent 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. 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 percent 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.