The difficult economic challenges bedevilling Africa largest economy Nigeria has stunted the growth of Neimeth International Pharmaceuticals plc, analysis of the financial statement shows.
For the period ended December 2014, the company’s net income dipped by 190 percent to N68.09 million from N75.76 million the same period of the corresponding year (Q1) December 2013, while sales fell by 43 percent to N269.26 million.
Nigeria drug makers have been grappling with the difficult economic conditions that are curbing performance for some time now. One of the major factors responsible for the sluggish growth of these firms is energy. Unstable power supply from the grid has spiralled overhead costs thus leaving drug makers with a very low profit margin as most of them incur huge costs on alternative sources to power plants for the purpose of production.
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The recent devaluation of the naira, which has made import very expensive, is also driving costs of Neimeth as the company relies on import to meet production.
Recall that the CBN devalued the naira by 8 percent to N168/$ from N155 in order shave off the effects of falling oil price and also to protect the depleting eternal reserves.
A cross section of analysts interviewed by BusinessDay say high cost of borrowings incurred in upgrading certification for their plants, combined with declining consumer spending are also denting sales and profitability of Neimeth.
To further exacerbate already anaemic position of the companies operating in the sector, the CBN has increased the Monetary Policy Rate (MPR) – from 12 percent to 13 percent and raised the Cash Reserves Requirement (CRR) on private sector deposits by 500 basis points from 15 percent to 20 percent.
Neimeth succumbed to cost pressures as cost of sales margin increased to 61.26 percent from 45.0 percent last year, which means the company’s input costs are suppressing profit margins.
Gross profits margin reduced to 38.74 percent compared with 54.95 percent the last year, while gross profit fell by 59.48 percent to N104.31 million.
The falling gross profits mean Neimeth is not able to produce at relatively lower costs.
Operating expenses margin increased to 53.53 percent in 2014 as against 34.50 percent in the preceding year, while operating expenses fell by 12 percent to N144.14 million.
Net margin, a measure of profitability and efficiency, increased to 25.28 percent from 16.17 percent the preceding year.
Neimeth’s total assets rose slightly by 1.43 percent to N2.82 billion compared with N2.78 billion the preceding year. The company’s share price closed at N0.74 on the floor of the exchange while market capitalisation was N1.16 billion.
BALA AUGIE
