May & Baker Nigeria PLC, a leading player in the Fast Moving Consumer Goods (FMCG) industry and health care space, on Thursday 26th April 2018, sold its food production line, worth some N775 million to DE United Foods Industries Limited (DUFIL), owners of Indomie noodles.
May & Baker’s food production line covers its noodles business under the brand name, Mimee Noodles.
It was a 100 percent acquisition of May and Baker’s food division, and less than 10 percent of its total balance sheet size, according to Sandra Aduba, May and Baker’s head of Communication Department.
“The Noodles industry is a red ocean and a loss contributing unit for us hence the decision to sell. The board and shareholders approved the sale at an EGM held on 23rd Nov. 2017,” Aduba said in an emailed response to questions.
Dufil said it embarked on the acquisition “in furtherance of our aim to contribute to the growth of the Nigerian economy, enhance production capacity and focus on non-oil exports to meet the needs of Economic Community Of West African States(ECOWAS) market and beyond which, will deliver optimum values to all our stakeholders,” the noodles giant said.
May & Baker shares have risen 3.85 per cent this year, according to data compiled by BusinessDay and was priced at N2.70 as at the close of trading in Lagos on Monday, with a market capitalisation of N2.6 billion.
According to its full-year 2017 financial report, the drug maker reported an 802 percent surge in Profit After tax (PAT) from N41 million in 2016 to N370 million in 2017, signalling an end to a scathing foreign exchange liquidity problem that ravaged the sector in 2016, spurring high operational cost since most of their inputs were mainly imported.
The FMCG firm said the acquisition was completed following receipt of approvals from the respective boards of Directors of DE United and M&B, the respective shareholders of both companies and the Securities and Exchange Commission (SEC).
The Central bank Of Nigeria (CBN)’s decision to restrict specific items from accessing its official window in 2016 placed significant pressure on input costs for FMCGs, as they had to source for Foreign exchange (FX) from the parallel market at higher rates to settle import bills which consequently depressed gross margins.
In response to this, several FMCG companies developed backward integration strategies and effective supply chain management to reduce over reliance on imports to militate against exchange rate volatility that has hitherto hampered growth
One could have wondered why the drug making firm resolved in selling out some of its asset giving the firm’s 2017 tremendous performance and a great rebound of economic activities.
Aduba disclosed that the divestment from the Noodles business provides much needed cash for the company, and will also reduce the losses hitherto contributed by this unit by helping management refocus on its new corporate vision which is “to be a leading healthcare brand in Sub-Saharan Africa.”
“We are re-focusing on our new vision of being a leading healthcare brand not just in Nigeria but in the SSA region leveraging on our Biovaccines JV with the government”.
“Our new Agreement with National Institute for Pharmaceutical Research and Development (NIPRD) to launch a new sickle cell drug; launching of our nature care brands and new products portfolio.”
“We are focused on delivering excellent returns for our shareholders and good value for all stakeholders. We will also be coming out to the stock market to raise fresh capital this year to drive our new vision,” Aduba added.
Dufil was incorporated in Nigeria as a private limited liability company on 16 September 1993, and has been involved in the manufacturing, selling, marketing and distributing of instant noodles ( under the indomie brand) since its inception.