The outlook of a company listed on the Nigerian Exchange (NGX) Limited, MeCure Industries Plc, has been lowered to negative from positive by GCR Ratings.
The rating firm also downgraded the Mecure Industries’ national scale long-term and short-term issuer ratings to BBB(NG) and A3(NG) from BBB+(NG) and A2(NG), respectively.
In the same vein, the long-term issue rating of Mecure Industries Funding SPV’s N3 billion Series 1 Senior Secured Bond has been demoted to BBB(NG)(EL) from BBB+(NG)(EL).
In a statement sighted by Business Post, GCR explained that the negative outlook on Mecure Industries “reflects our expectation that the ratings could face further downward pressure if operating cash flows (OCF) remains negative from intense working capital absorption, and liquidity coverage stays below 1x due to increased reliance on short-term debt funding, especially if the proposed equity raise does not materialise or meet expectations.”
It was noted that the use of high short-term debt to finance expanded working capital requirements has weakened the liquidity profile of the company, with rising finance costs and the elevated operational needs.
GCR said it adjusted Mecure Industries’ liquidity profile to reflect the persistently weak coverage resulting from elevated working capital financing, with short-term debt rising to N28.3 billion against a low cash balance of N1.5 billion as of the first quarter of 2025.
Despite factoring in projected improvements in OCF of about N5.8 billion, a portion of inventory holdings (haircut at 40 per cent), and committed revolving credit facilities amounting to N8.9 billion as of May 2025, the uses versus sources liquidity metric remained below 1.0x over a nine to 21 months period.
However, it was noted that capital investment is expected to remain modest over the medium term considering the recent completion of production plant renovations and expansion.
It was stated that plans by the healthcare firm to raise N30 billion from an initial public offering in 2026, aimed at improving the capital structure, should cut down the high near-maturing debt and support working capital funding.
The company’s business profile remains a positive rating factor because of its diversified portfolio of over 140 product offerings across nine therapeutic classes, with a strategic focus on the margin-enhancing ethical medicine segment.
Its competitive position is further underpinned by its nationwide network of about 100 distributors, as well as long-standing relationships with suppliers and foreign technical partners, which facilitates supply chain security, product development, and modern manufacturing practices.
Bolstered by expanding scale, Mecure Industries aims to increase market penetration through new product introductions, competitive pricing strategy, contract manufacturing arrangements, and growing export activity, which are expected to strengthen its competitive stance over the review period.
In the 2024 fiscal year, Mecure Industries grew its earnings by 44.9 per cent to N46.0 billion due to volume growth, inflation-driven price adjustments, the introduction of new formulations, and expanded production capacity.
This was sustained into the first quarter of this year and GCR projects that the firm could improve its revenue by 40 per cent due to increased capacity utilisation, rising sales volumes, and incremental contributions from export sales and new contract manufacturing arrangements.
Further, the EBITDA margin is projected to remain strong at around 27 per cent over the next 21 months, supported by increased contributions of margin-safe ethical medicines, sustained cost management, improved scale efficiency and cost savings from removal of VAT and import duties on drugs.