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ANALYSIS: How Finance cost dragged Fidson Healthcare Plc’s earnings

Fidson Healthcare Plc. (FIDSON) continued where the previous year’s revenue chase left off, bringing FY2018 to a close of NGN16.23bn which translates to a growth of 15.45% (vs. NGN14.06 in FY2017).



Ohara Pharmaceutical increases take in Fidson, Fidson and Ohara signs partnership, Fidson Healthcare Plc, Fidson list additional shares Fidson and GSK business partnership

Northward Trend in Top-line Persists: Fidson Healthcare Plc (FIDSON) continued where the previous year’s revenue chase left off, bringing FY2018 to a close of NGN16.23bn which translates to a growth of 15.45% (vs. NGN14.06 in FY2017). Increase in sales volume, on the back of demand steadiness has been the main driver of growth considering the supplydemand gap for medications in Nigeria. The ethical unit made its debut as a driver of growth, accelerating by 35.56% to deliver a revenue of NGN9.09bn from NGN6.71bn in FY2016.

Although, revenue generated from Over-the-counter medicines and Consumer Unit
declined by 2.56% and 25.05% respectively, the proceed from the sales of ethical products
was sufficient to offset the dip. The revenue decline in these business segments was an
upshot of price reduction by some market players in the generics space (Over-The-Counter,
Multivitamins) and declining market share in the consumer unit, amongst others. On the
back of increased government partnerships, growing demand for the firm’s products and
the introduction of new high-margin products, we have made a revenue growth projection
of 18.89%, which implies FY2019 revenue of NGN19.30bn.

Costs Tread Unexplored Path: For the first time since 2012, cost to sales ratio shot
upwards to 61.06% in 2018FY from 49.10% in 2017FY. The surge in the cost of importing raw materials on the back of regulatory issues faced by Chinese manufacturers, congestion
of the sea ports and cost of transporting raw materials to the plant, contributed immensely
to the spike in cost. Operating expenses took a different twist, declining marginally by 4.02% to settle at NGN4.52bn from NGN4.71bn. Consequently, gross margins took a dip from 50.90% to 38.94% and net margin from 7.55% to -0.60%. The outlook on cost is significantly dependent on the extent to which the pressure points surrounding costs are resolved.

We are projecting a marginal decline in cost to sales ratio to 57.50% aligning with management’s guidance on expected energy cost reduction and sea ports decongestion, amongst others.

More so, we expect that the projected revenue growth would be sufficient to cushion the
sharp effects of costs. In this light, we have projected an operating margin of 16.20% and
net margin of 8.73% on the back of improved revenue growth, costs moderation and tax
holiday status.


High Leverage and Weak Working Capital Profile Fraught Balance Sheet: Sequel to the construction of its biotech plant, the firm accumulated series of interest-bearing debts,
bringing the firm’s total debt to NGN5.83bn (vs. NGN2.99bn in FY2017). The surge of 71.19% in interest bearing loans fed deeply into PBT in form of a 92.18% spike in finance charges by 2018FY. The firm intends to pay down outstanding loans with 60.57% of the rights issue proceeds (NGN1.82bn) and 36.67% to finance working capital.

Recommendation and Outlook: Based on management’s guidance and coupled with our
outlook, we are positive that a build-up of factors such as the demand-supply gap in the
Nigerian infusions market, the firm’s market share, the introduction of about 20 highmargin products, and increase in the price of several products will provide a potentially
viable platform to drive revenue and earnings growths in the near term. In this light, we
have slightly reviewed our initial target price of NGN5.87 to NGN5.90 using a target EPS of
NGN0.75(NGN-0.06 in 2018FY) and target P/E of 7.90x.

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Nigeria’s border reopening will not impact profitability in 2021 – Flour Mills GMD

Flour Mills Nigeria Plc has stated that the recent reopening of the nation’s land borders will not affect the profitability of the company.



Mr. Omoboyede Olusanya, the Group Managing Director of Flour Mills Nigeria Plc has disclosed that the recent reopening of the nation’s land borders will not adversely impact the performance and profitability of the company in 2021 and beyond.

He added that FMN will continue to leverage brand loyalty, product standardization and innovation, as well as improved cost efficiency to increase profitability in 2021.

This statement was made by the Olusanya during the company’s 9M’20/21 Investor Webinar which held virtually on January 26, 2020.

According to the statement made by Mr. Olusanya at the virtual meeting, the reopening of the nation’s land border will not affect the company’s sales and revenue, as Flour Mills Nigeria is focused on increasing operational efficiency with accelerated plans for cost optimizations across the group to ensure competitive product offerings and profitability in the new operating environment, occasioned by the border reopening.

He revealed that the company will continue to invest in local content development, production capacity and aggregation to strengthen product innovation and product standardization in a bid to foster brand loyalty.


In line with this, Flour Mills Nigeria has invested heavily to upscale its Regional Distribution Centers (RDCs), in order to gain direct access to consumer market segments across the country, and expand consumer reach with the road to market initiatives and product offerings across the group, especially in the B2C segment.

Olusanya revealed that the group has successfully opened new regional distribution centers (RDCs) in Kano, Magboro and Abuja targeting the new fast-growing B2C product categories (fats, sugar and garri).

He added that the FMN Group among other strategic investments made, has invested in trucks to support the RDCs, animal feeds and starch value chains; as well as sales force automation platforms to ensure high-quality processes and services.

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He concluded that the activities of the company will be complemented by the efforts of the nation’s border security, as these agents would ensure that the borders do not become porous, and would help to curtail markets from being proliferated by imported items.

What you should know

  • Recall that Nairametrics reported that Flour Mills Nigeria Plc declared a profit of N5.65 billion in the third quarter ended, 31st December 2020.
  • The report revealed that the profit which Flour Mills made in the third quarter of its accounting year 2020/2021 rose by a whopping 150.36% when compared to the profit it made in the corresponding period of 2019.
  • It is important to note that the impressive performance of the company was driven by the agro-allied segment. The Agro-Allied segment benefited immensely from the August 2019 border closure, as the profit from this segment improved by 15,268%.

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South African President appeals to wealthy countries not to hoard COVID-19 vaccines

South African President, Cyril Ramaphosa has called on the world’s wealthiest countries to stop “hoarding” vaccines.



South Africa High commission in Nigeria shuts its offices, South Africa announces 21-day lockdown following spike in Coronavirus cases

The South African President, Cyril Ramaphosa has urged the world’s wealthiest countries to stop “hoarding” vaccines and called for an end to “vaccine nationalism.”

He made this call at the World Economic Forum’s virtual Davos Agenda event, where he clearly cautioned that some countries had ordered more supplies of vaccines than they needed, and that this was counterproductive to the global recovery effort.

According to him,

  • “Ending the pandemic worldwide will require greater collaboration on the rollout of vaccines, ensuring that no country is left behind in this effort”
  • “The rich countries of the world went out and acquired large doses of vaccines from the developers and manufacturers of these vaccines, and some countries have even gone beyond and acquired up to four times what their populations need”
  • “That was aimed at hoarding these vaccines and now this is being done to the exclusion of other countries in the world that most need this”

What they are saying

According to Africa CDC Director, John Nkengasong, the African continent is quite facing a “very aggressive second wave” of the pandemic, with mortality increasing on average 18% across the 55 African member states last week.

“We as a continent must recognize that vaccines will not be here when we want them, but as such we need to really focus on the public health measures that we know work”


He however praised the progress of the African Vaccine Acquisition Task (AVAT) Team, which he said was created when AU nations realized “how the world’s richest countries are behaving.”

What you should know

  • South Africa is the country, worst hit by Covid-19 on the continent.
  • As at date, the country had recorded more than 1.4 million cases with 41,117 deaths.
  • The African Vaccine Acquisition Task (AVAT) Team has secured a provisional 270 million doses for AU member states directly, in addition to the 600 million expected from the World Health Organization’s COVAX initiative.

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IMF optimistic about global economy but warns new Covid variants could affect recovery

IMF is quite optimistic about the fortune of the global economy but expressed fear that the new Covid variant could derail economic recovery.




The International Monetary Fund (IMF) has expressed optimism about the global economy but warns that the new COVID 19 variant could affect the global economic growth, according to its latest World Economic Outlook.

According to the report, “the institution now expects the global economy to grow 5.5% this year — a 0.3 percentage point increase from October’s forecasts. It sees global GDP (gross domestic product) expanding by 4.2% in 2022”.

According to its Chief Economist, Gita Gopinath:

  • “Much now depends on the outcome of this race between a mutating virus and vaccines to end the pandemic, and on the ability of policies to provide effective support until that happens.
  • “There remains tremendous uncertainty and prospects vary greatly across countries.
  • China returned to its pre-pandemic projected level in the fourth quarter of 2020, ahead of all large economies. The United States is projected to surpass its pre-Covid levels this year, well ahead of the euro area.
  • “Policy actions should ensure effective support until the recovery is firmly underway, with an emphasis on advancing key imperatives of raising potential output, ensuring participatory growth that benefits all, and accelerating the transition to lower carbon dependence.”

What you should know

  • There has been a surge in the number of reported cases of the new variant Covid-19 infections and deaths over the past few months.
  • The new variant has been described as being more infectious and potentially deadlier than the original strain.
  • The IMF had cut its GDP forecasts for the euro zone this year by 1%.
  • It is being projected that the 19-member region, which has been severely hit by the pandemic, would grow by 4.2% this year.
  • Germany, France, Italy and Spain — the four largest economies in the euro zone — also saw their growth expectations cut for 2021.
  • Economic activity in the region slowed in the final quarter of 2020 and this is expected to continue into the first part of 2021. The IMF does not expect the euro area economy to return to end-of-2019 levels before the end of 2022.
  • IMF revised its GDP forecast upward by 2% points on the back of a strong momentum in the second part of 2020 and additional fiscal support, with GDP expected to grow to 5.1% this year.

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