As H1 Profit Grows by 939%, Neimeth Emerges Investors’ Toast

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Bamidele Famoofo

Neimeth International Pharmaceuticals Plc emerged the toast of investors as it grew its half-year profit by 938.5 per cent. It was its best performance in the last four financial years. The performance according to the management of the company could be attributed to increasing market share and cost management strategies recently introduced to better position it among its peers.

Data obtained from the Nigerian Stock Exchange (NSE) showed that investors reacted with a scurry for Neimeth’s shares, triggering a demand-driven share price appreciation that has seen the stock within the best-performing stock at the Nigerian stock market with capital gain of 79.2 per cent in recent weeks.

Interim report and accounts of Neimeth for the six-month period ended March 31, 2020 released at the NSE indicated significant growths across key performance indicators with growing sales and operating efficiency driving operating profit by 225.28 per cent.

Total turnover crossed a record N1 billion mark with 19.4 per cent growth to N1.165 billion by March 2020 compared with N975.98 million recorded in comparable period of March 2019. The top-line growth was driven by increased sales in its domestic Nigerian market. The company recorded growths across its two business segments of pharmaceuticals products and animal health products with the animal health products showing strong prospects for the top-line with 897.5 per cent growth during the period.

Gross profit rose by 22.74 per cent from N450.74 million in 2019 to N553.26 million in 2020. While the company’s continued push for the market saw a relatively modest increase in marketing and distribution expenses, administrative expenses dropped by 10.84 per cent to N228.71 million in March 2020 as against N256.52 million recorded in comparable period of 2019. Profit after tax leapt by 938.5 per cent to N56.6 million by March 2020 compared with N5.45 million by March 2019. Earnings per share thus jumped from 0.29 kobo in March 2019 to 2.98 kobo by March 2020.

Neimeth’s share price on Monday at the Nigerian Stock Exchange (NSE) opened at 86 kobo per share, representing an increase of 79.2 per cent on market value per share of 48 kobo recorded by the period ended March 31, 2020.

The price appreciation might not be unconnected with increasing prospects of dividend payment in the current business year; after shareholders of the company at their annual general meeting earlier in March 2020 approved a balance sheet restructuring that would see the write-off of accumulated losses and primed the company for dividend payment from net profit.

Managing Director, Neimeth International Pharmaceuticals Plc, Pharm Matthew Azoji, said the half-year results built on steady growths witnessed in recent periods and further demonstrated that Neimeth is firmly on an upward growth trajectory.

He said the results showed early gains of the company’s five-year strategic plan noting that the company would vigorously expand and reposition its businesses to cement its position as a leading player in not only Nigeria’s healthcare industry but also in the wider West African region while simultaneously ensuring good returns on investment to shareholders.

According to him, the strategic direction for 2020-2024 would see the company implementing bold and gradual expansion initiatives including the upgrade of its factory at Oregun, Lagos state; development of new manufacturing facilities and expansion of the company’s marketing drive to Sub-Saharan Africa (SSA).

Azoji, who was named among the top 25 CEOs in Nigeria by BusinessDay Newspaper and also won the sectoral leadership award of PEARL Awards, said the company, was increasingly exploring viable options for strategic local and international partnerships to optimise its excess production capacity through contract manufacturing or direct product development.

He reassured that the company remained focused on attaining the good manufacturing practice (GMP) certificate of the World Health Organisation, in line with its current strategic plan to be manufacturing hub for pharmaceuticals and healthcare products in Sub-Saharan Africa.

“Our results show that we are on course to achieving our strategic growth objectives. We remain committed to our goal of repositioning the company to play greater roles in the healthcare industry, deliver better returns on investment to shareholders and greater benefits to all other stakeholders,” Azoji said.

He said that the COVID-19 pandemic had further highlighted the importance of the healthcare industry adding that Neimeth will continue to explore safe ways of safeguarding people’s health through proactive investments in research and product developments.

The six-month results built on first quarter performance and extended the positive outlook of the company. The first quarter report for the three-month period ended December 31, 2019 had shown that turnover leapt by 167.1 per cent to N606.5 million compared with N227.07 million recorded in comparable period of 2018. Gross profit quadrupled by 465.6 per cent from N53.52 million to N302.71 million. The company replaced operating loss of N119.3 million in December 2018 with operating profit of N111.68 million by December 2019. The bottom-line turned positive with a net profit of N82.65 million in December 2019 as against net loss of N139.16 million in December 2018. Earnings per share improved from a negative of 8.0 kobo to a positive of 4.35 kobo.

Neimeth had also seen considerable growths in the immediate past business year. The audited results for the year ended September 30, 2019 showed that Neimeth’s turnover rose from N2.27 billion in 2018 to N2.37 billion in 2019. Gross profit also indicated similar modest growth rising from N1.16 billion in 2018 to N1.20 billion in 2019. Operating profit rose by 47.9 per cent to N413.38 million in 2019 as against N279.42 million in 2018. Finance costs also declined from N112.96 million to N108.9 million. Profit before tax jumped by 82.9 per cent from N166.46 million in 2018 to N304.44 million in 2019. After taxes, net profit increased by 48.7 per cent from N148.02 million to N220.15 million. With these, earnings per share rose by 50 per cent to 12 kobo in 2019 as against 8.0 kobo in 2018.

Performance ratios underscored significant improvements in the profitability of the company. While gross profit margin dropped from 51.1 per cent in 2018 to 50.6 per cent in 2019 due to industry-wide headwinds, operating profit margin, which denotes the company’s managerial ability to curtail headwinds and drive core business operations profitably, improved by five percentage points from 12.3 per cent in 2018 to 17.4 per cent in 2019. Pre-tax profit margin-which measures untaxed profit per unit of sales, nearly doubled from 7.3 per cent in 2018 to 12.8 per cent in 2019. Net profit margin, after taxes, also improved from 6.52 per cent in 2018 to 9.28 per cent in 2019.

Neimeth is over 61 years old as a business in Nigeria. It transited from an arm of a foreign transnational, Pfizer Inc. to Neimeth International Pharmaceuticals Plc in May 1997 through a management buyout of the US investors to become a wholly owned indigenous company. Since then, the company has metamorphosed into a leading brand in the Nigerian healthcare industry with products that meet international standards.