…sees 7.8% revenue growth in 2023
Emzor Pharmaceutical reported a 7.8% revenue growth in the 2023 financial year up slightly from 7.1% in 2022, but way below the 23.6% growth recorded in 2021.
Overall, the group however reported a net loss position after accounting for high finance costs and the foreign exchange loss arising from its foreign currency denominated debt.
Emzor’s sustained revenue progression underpins it as one of Nigeria’s leading drug manufacturers. This is, however, moderated against escalating debt over the past 24 months due to capital expansion, which has weakened leverage metrics and liquidity.
Emzor’s competitive position is bolstered by its well-recognised brands and a diversified product portfolio of over 200 products under 16 therapeutic categories.
The group’s business profile is further enhanced by an extensive distribution network and established partnerships with global suppliers and technical partners that have facilitated stable access to key inputs, as well as continuous product development and innovation.
To reduce the high reliance on imported active pharmaceutical ingredients (APIs) and mitigate the adverse impact of the Naira devaluation on profitability, Emzor embarked on Nigeria’s first APIs manufacturing plant for anti-malarial drugs in 2021, with production anticipated to commence by end-2025.
This project is aimed at enhancing the group’s competitiveness in the local industry while supporting its geographical diversification into other West African countries.
This, alongside other ongoing investments in various drug formulations, should drive Emzor Pharmaceutical revenue growth and support a return to profitability over the medium term.
However, the adverse impact of the general inflationary pressures and currency devaluation on consumer demand and volumes, affected its margins.
More significantly, a steep rise in input prices and other cost pressures resulted in a narrowing of the EBITDA margin to 3.4% in 2022 (2021: 16.8%; 2020: 20.3%), before rising to 7.3% in 2023, albeit still low.
Analysts at GCR say Emzor’s ability to return to profitability is dependent on substantially reducing its foreign loan exposure which constitute 35% of total debt portfolio as of October 2024 (2023: 20%).
Gross debt increased to N36.5Bn in financial 2023 (2022: N23.8Bn) and further to N39.7Bn as of 10M 2024 due to additional loans obtained to fund capacity expansion towards new product development.
The elevated debt against lower earnings weakened leverage metrics considerably with net debt to EBITDA metric spiking to 17.9x in 2022 and remaining very high at 11.6x in 2023.
Operating cash flow (OCF) coverage of gross debt weakened to 8% in 2023 (2022: 35.4%), albeit remaining positive due to favourable credit terms with suppliers. Additionally, net interest coverage weakened below 1x in 2022 and 2023 (2021: 2.0x) due to higher interest payments from elevated debt against low earnings.
Emzor’s debt is set to remain elevated due to proposed new debt of around USD5M.
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