The favourable competitive position and solid earnings growth of Fidson Healthcare Plc have earned the company the affirmation of its A(NG)/A1(NG) ratings by GCR Rating.
In a statement from GCR obtained by Business Post, it was disclosed that drug manufacturing firm also has a stable outlook because of the expectations that its enlarged business profile will continue to underpin strong earnings growth, while the relatively moderate gearing metrics will provide the necessary headroom for the restructuring of its balance sheet.
Fidson is a leading player in the Nigerian pharmaceutical industry. Its large scale, multiple product offerings and ongoing capacity expansion have been leveraged to drive robust earnings growth. However, persistent working capital pressure has resulted in significant strain on gearing metrics and liquidity, thereby constraining the rating.
GCR stated that the ratings of the company are sustained by robust revenue growth and strong earnings over the review period, with revenue increasing by 58.7 per cent to N84.1 billion in the 2024 financial year and by 66 per cent in the first quarter of 2025 due to higher traded volumes and upward price adjustments.
Additionally, the EBITDA margin improved to 24 per cent in 2024, supported by improved operating efficiencies and product mix optimisation.
The rating agency said it expects Fidson to sustain this strong momentum with 40 per cent topline growth on the back of continued capacity expansion and further price adjustments. “This, combined with stringent cost control, could sustain the EBITDA margin within the 22 per cent-24 per cent range over the outlook period,” a part of the statement said.
Fidson offers over 150 products across 10 therapeutic categories and its ongoing capacity expansion and a growing product portfolio further supports this position, with its network of more than 120 distributors nationwide ensuring strong retail visibility.
To further enhance its competitive position, the company plans to broaden its product range to cater to affordable market segment and anticipates ramping up export sales into other West African markets in the short to medium term.
However, the significant reliance on short term debt facilities to fund working capital indicates liquidity stress, despite strong earnings moderating gearing metrics.
Its rapid business expansion has materially elevated the working capital requirements relating to inventory procurement and prepayments for imports, necessitating substantial use of short-term debt, resulting in a steep negative net operating flow of N5.4 billion last year and N3.8 billion in Q1 of 2025 versus the moderately negative OCF in 2023.
The widening funding gap resulted in an increase in gross debt to N32.9 billion in 2024 from N28.5 billion in 2023 and N14.9 billion in 2022, with over 75 per cent of total debt being short term.
But, GCR noted it has taken cognisance of a proposed equity raise where some of the proceeds to be applied to reduce short term debt, and further equity to support working capital requirements.
“This, in addition to expected robust earnings growth would ease gearing pressure and allow a greater proportion of working capital requirements to be funded internally,” it stated.