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Monday, March 27, 2023

Emzor Pharmaceutical : Inside the World of Nigeria’s Most Profitable Drug Company

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If Emzor Pharmaceutical Industries Limited were a listed or quoted company, it would have been the largest drugmaker by market capitalization in Nigeria.

For instance, the drug maker would have N12.93 billion market capitalization according to MoneyCentrals analysis which dwarf peer rival’s Fidson Healthcare’s market value of (N10.43 billion); May and Baker, (N6.97 billion), and GlaxoSmithKline, (N7.15 billion).

The market capitalization of Emzor Pharmaceutical was arrived at by multiplying industry’s average price to sales ratio by the drug manufacturer’s revenue.

The price-to-sales ratio (Price/Sales or P/S) is calculated by taking a company’s market capitalization (the number of outstanding shares multiplied by the share price) and dividing it by the company’s total sales or revenue over the past 12 months. The lower the P/S ratio, the more attractive the investment. Price-to-sales provides a useful measure for sizing up stocks.

Emzor’s consistent revenue growth is mainly responsible for the strong market cap as it continues to rely on an excellent research and development department to produce drugs that are accepted across the globe.

The company, which was founded by the indefatigable Pharmacist Stellar Okoli over 40 year ago, posted revenue of N25.98 billion as at December 2019.

That compares with Fidson Healthcare December 2020 top line of N18.27 billion; May and Baker, (N9.30 billion), and GlaxoSmithKline, N21.19 billion.

Emzor is also the most profitable drug maker in the country, which means it is able to contain costs while contemporaneously translating top line impressive performance into bottom line growth.

It posted net income of N1.47 billion as at December 2019, and that compares with Fidson Healthcare (N1.20 billion), May & Baker (N964.96 million), and GlaxoSmithKline’s N622.23 million.

The founder and Group Chief Executive Officer of Emzor Pharmaceutical Limited, Stella Okoli, attributed the success of the company to its strict adherence to standards.

She said the progress recorded over the years was due to the determination of the company to provide a channel where a wide range of high-quality pharmaceutical products that meet international standards at affordable and competitive prices, could be made readily available to all and sundry.

 “This is seen in the act of giving unlimited wellness to millions of Nigerians, which the Emzor brand has been consistently doing over the years.

“Today, what we are celebrating is the testimony of our unwavering commitment to providing our customers with health care products and services of consistently high quality, made readily available at prices which create value for all stakeholders.

“This is what we have been doing and we shall continue to ensure that quality and affordable pharmaceutical products are readily available to an average Nigerian at all times.”

Okoli said the company would consistently maintain its vision of being the leading health care company in Africa through the provision of world-class products and services.

The drug maker’s arrays of products are also contributing to earnings, and a strong cash flow position means it has the financial strength to pay dividends, meet debt obligations and fund future expansion plans.

The company now manufactures a wide range of products in the analgesic, anti-malaria, vitamin/haematinics/multivitamin supplement, anti-helmintic, antibiotics and therapeutic categories. It has in its stable more than 120 different products.

Tough and unpredictable Macroeconomic environment

Nigeria’s drug-manufacturing companies have struggled to source raw materials and imported inputs because of a foreign-currency squeeze caused by the plunge in income from oil that was exacerbated by the advert of the coronavirus pandemic.

The majority of Nigerians cannot afford drugs as inflationary pressures have eroded their purchasing power as the cost of healthcare continues to spiral up.

Healthcare cost, which is an inconspicuous driver of core inflation, rose by 15.8 percent year on year (y/y) and 1.1 percent month on month ( m/m), according to the latest inflation figures released by the National Bureau of Statistics (NBS).

In the five years preceding May 2020, the Health care sub-index of the core inflation grew at an average rate of 10.0 percent.Following the Foreign Exchange (FX) concerns in 2020, healthcare cost has been on the rise.

The rise in the cost of pharmaceutical products, medical services, dental services, paramedical services, and hospital services have jointly accounted for the 15.8 percent (y/y) rise in health care cost in the last 12 months ending May 2021, according to analysts at CSL Stockbrokers Limited.

“In our view, cost, and accessibility of healthcare services in Nigeria must be an area of focus for the government and we believe both public and private sector participation will be required,” said the analysts.

The International Monetary Fund and the World Bank have urged the central bank to adopt a unified foreign exchange system that will spur economic growth and pave the way for businesses to thrive.

Emzor raises capital to fund expansion 

Emzor Pharmaceuticals was able to access the domestic debt capital markets for the first time and raised 5 years financing in local currency by issuing a N13.73 billion 5-Year 10 percent = Series 1 Senior Unsecured Fixed Rate Bond due 2026 under a N50 billion Debt Issuance Programme.

The N13.73 billion series 1 usecured bonds was accorded ‘A-’ credit rating by Global Credit Rating Co. The bond instrument will be exclusively listed on the NGX Ltd platform.

Global Credit Ratings has accorded an indicative long-term credit rating of ‘A-(NG)’ to Emzor Pharma Funding SPV PLC’s proposed N15bn Series 1 Senior Unsecured Fixed Rate Bonds, with the Outlook accorded as Stable.

The rating was largely supported by Emzor Pharmaceutical’s solid competitive positioning and its relatively strong capital structure and credit risk profile.

The drug maker is solvent and can meet both short- and long-term liabilities and there are no threats to going concerns; for instance, its operating income covers interest expense as times interest coverage ratio stood at times 2.24 times earnings.

The interest coverage ratio is a debt and profitability ratio used to determine how easily a company can pay interest on its outstanding debt. The interest coverage ratio may be calculated by dividing a company’s earnings before interest and taxes (EBIT) by its interest expense during a given period.

An interest coverage ratio of 1.5 is generally considered a minimum acceptable ratio for a company and the tipping point below which lenders will likely refuse to lend the company more money, as the company’s risk for default may be perceived as too high.

Emzor pharmaceutical has a debt to equity ratio of 43 percent in December 2019; this means that for every Naira in equity, the drug maker has 42k in leverage. A ratio of 1 would imply that creditors and investors are on equal footing in the company’s assets.

The lower debt to equity ratio indicates the drug maker is nearly equity owned and there is more room to borrow from the debt market to retire existing obligations and invest in more research projects capable of magnifying earnings.  Of course, a levered firm (the one with a higher debt to equity ratio) generates more earnings and has a higher value because it is cheaper to borrow since interest on debt enjoys tax shield and equity doesn’t.

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  1. Hello, in your article you said Stella Okoli is a Doctor, please correct that, SHE IS A PHARMACIST, not a DOCTOR, reflect it as such please.

    Thank you.


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