May & Baker Cost Containment Efforts Drive Q1 Net Profit By 488%

May & Baker, one of Nigeria’s oldest pharmaceutical and healthcare products manufacturer, on Friday presented its unaudited financials for the first quarter ended March 31, 2018, bearing testimony to the improvement management as profit soared by 488.03%, despite a 0.57% limp in sales revenue.
The result from the drop in finance costs, besides manifesting the success of management’s cost-cutting efforts, inspired hope of bigger returns on investment if the tempo is sustained till month end.

Specifically, revenue from sales crawled by N13.604m from N2.305bn in the corresponding period of 2017 to N2.375bn, driven once again by the pharmaceuticals segment, which contributed N2.163bn or 91.05% of total revenue; up from N1.854bn or 78.52% of prior Q1. Beverage followed with N18.748m, up from N15.342m; while the foods segment slipped from N491.932m, to N193.745m.
By geography, sales revenue from the company’s eastern Nigerian market remained the biggest contributor at N879.483m, even as it dropped to N999.796m; Lagos accounted for N770.054m, up from N754.335m; ahead of N413.51m from western Nigeria, from N362.103m; while N312.713m came from the north, as against N245.922m in 2017Q1.

This is coming amidst the reported sale of the Mimee Instant Noodles brand by the management of May & Baker to competitor- De-United Foods Industries Limited (DUFIL), owners of Indomie Noodles at the cost of N775m. DUFIL also bought two production lines of Dangote Flour Mills’ noodles and pasta business last November for N3.75bn.

Cost of sales dropped slightly to N1.628bn, from N1.678bn; leaving gross profit of N747.368m, compared to N683.731m reported in the previous Q1. While the pharmaceutical segment contributed N783.231m to gross profit, up from N613.404m in 2017Q1; the beverage segment posted a N1.307m loss, down from N2.206m in 2017; which was minute when compared to the N34.556m loss from the food business from a profit of N72.533m.

Other operating income rose to N3.58m from N1.179m, representing miscellaneous income earned on insurance claims received from HUGG Robinson and BCM Insurance Broker, besides being part of income from sale of waste box, waste sugar cartons, flour bags, waste sacks, pallets, woods, bottles, etc. Distribution, sales and marketing expenses fell to N292.612m from N308.457m; while administrative expenses fell from N143.636m in 2017 to N136.94m. Operating profit therefore climbed to N321.396m, up from N232.817m, representing an N88.579m or 38.04% growth.

Investment income for the period dropped slightly to N6.591m, up from N7.601m, comprising the N6.384m rental income earned on some part of the floor space of the company’s Ikeja factory leased to some other companies, up from N4.844m; while interest income on fixed deposits with various commercial banks in the country of N207,000, as against the N2.757m in the preceding first quarter. Finance costs reduced by N85.692m or 41.82% from N204.916m from N119.224m, with interest on bank overdrafts and loans falling to N104.288m from N121.665m; while interest on related party loans declined from N83.251m to N14.936m.

Profit before tax for the period stood at N208.762m from just N35.502m, while tax expenses jumped five-fold from N11.361m to N66.804m, resulting in net profit of N141.958m, as against the N24.141m in the 2017Q1. The net profit translated to Earnings Per Share of 14.49 kobo, as against the previous 2.46 kobo; just net profit margin for the period improved to 5.97%, compared to 1.02%.

It is also expected that the investment by May & Baker in vaccine production facilities would in the coming years contribute significantly to the top and bottom-lines in addition to servicing the huge West African market for the good of investors and traders.

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