GCR Affirms Emzor Pharmaceutical Issuer Ratings of A-/A2
GCR Ratings has affirmed Emzor Pharmaceutical Industries Limited’s national scale long-term and short-term issuer ratings of A-(NG) and A2(NG), respectively.
The ratings agency also affirmed the national scale long-term issue rating of A-(NG) accorded to Emzor Pharma Funding SPV Plc’s NGN13.729 billion Series 1 Senior Unsecured Bonds.
The outlook on the pharmaceutical company has been revised to Rating Watch Negative from stable, according to rating note released on Tuesday.
GCR said the Negative Rating Watch reflects the potential for a liquidity event due to the maturity of its NGN13.729 billion bond maturing in January 2026.
Ratings analysts said in the report that while the group’s intention is to refinance the facility, short-term bridged financing is being negotiated to cover the redemption, albeit at an elevated interest margin.
“This constraint has counterbalanced our considerations regarding Emzor’s recent return to profitability and an improvement in leverage metrics.
“We continue to view its position as a major player within the Nigerian pharmaceutical sector favourably”, GCR said.
The company’s liquidity assessment remains slightly positive based on a solid ratio of sources to uses in previous reviews, the rating note acknowledges.
However, ratings analysts said the ratio is currently weak because of the impending maturity of its NGN13.729 billion bond in January 2026. Nevertheless, the rating assumes this obligation being refinanced, either through the short-term bridge finance facility or through Nigerian capital market.
Ratings analysts said this is supported by the group’s demonstrated access to diverse financiers, including local and international financial institutions, as well as the Nigerian capital market.
The options include proposed refinancing facilities, current liquidity sources comprise a cash balance of NGN1.8 billion as of 30 September 2025 and projected operating cash flows of NGN6.3 billion, providing coverage of 1x over the 15-month period to December 2026.
“While high capital spending is expected due to ongoing capacity expansion, this is contingent on access to long term financing. We also expect a degree of flexibility around deployment for capital expenditure, should liquidity pressures intensify”.
Emzor’s positive earnings profile is underpinned by improved performance post the significant pressure experienced in prior years. The pharmaceutical company’s revenue grew by 24.1% to NGN51.1 billion in the financial year ended 31 December 2024, well above the 7.1% and 9.6% growth rates recorded in 2022 and 2023, respectively.
This was sustained into the nine-month period ending 30 September 2025 (9M 2025), with revenue rising by an annualised rate of 34% to NGN51.3 billion.
Ratings analysts said this trajectory has been supported by inflation-led price reviews, higher sales volume and an expanding product portfolio.
In addition, GCR ratings acknowledged that the exit of multinational pharmaceutical companies from the Nigerian market has created significant opportunities for local manufacturers to capture additional market share.
Supported by increasing focus on higher-margin products, and better cost optimisation, Emzor’s EBITDA margin widened to 18.8% in 2024, and further to 20.7% in 9M 2025 from 8.5% in 2023, and 3.4% in 2022.
Accordingly, the pharmaceutical company’s operating profit jumped to NGN7.8 billion in 2024 and NGN9.4 billion in 9M 2025, from just NGN1.2 billion in 2023.
Significantly, there was a return to net profit in 9M 2025, following three years of net losses, negatively impacted by rising finance charges and foreign exchange losses.
“We expect sustained earnings growth over the outlook period bolstered by higher volumes and the introduction of new drug formulations, with revenue projected to grow by about 40% and 30% for full year 2025 and 2026, respectively.
“We also forecast an EBITDA margin of around 20% over the next two years, bolstered by increased contributions from higher-margin medicines, enhanced cost efficiency, stable currency and cost savings from VAT and duty waivers on pharmaceutical imports”, GCR said.
Ratings analysts also said leverage and capital structure remains negative to the rating despite the improvement in gearing metrics.
The company’s gross debt increased to NGN44.2 billion in 2024 from NGN36.2 billion in 2023 due to new facilities and adverse currency movements on the foreign-denominated loans.
Nonetheless, the earnings recovery supported an improvement in leverage metrics, with the net debt to EBITDA metric reducing to 4.5x in 2024 from 9.8x in 2023 and 2.8x in 9M 2025.
GCR said earnings also had a positive impact on net interest coverage, which strengthened to 3.9x in 9M 2025 from 2.8x in 2024 and 1.4x in 2023 despite high interest rates.
Conversely, while operating cash flow (OCF) coverage of gross debt improved to 19.4% in 2024 on the back of favourable supplier credit terms (negative in 2023), the metric weakened to 3.7% in 9M 2025 amid heightened working capital pressures arising from elevated debtors’ balances.
“We expect debt to remain elevated over the outlook period due to increased operational needs and capital commitments; however, the leverage metrics are expected to strengthen as earnings improve”.
Currency risk, albeit minimal is counterbalanced by the long-term maturity profile of loan facility, ratings analysts explained.
Emzor’s competitive position remains a positive rating factor, underpinned by its solid market position as a manufacturer of about 200 drug formulations under 16 therapeutic categories, with well-established brands leading key generic segments.
The group’s broad market reach is supported by extensive distribution network of over 160 distributors across Nigeria and Sub-Saharan Africa. Furthermore, it maintains relationships with international suppliers and technical partnerships with global pharmaceutical players, supporting supply chain stability and product development.
As part of its backward integration plan, the group commenced the construction of Nigeria’s first anti-malarial active pharmaceutical ingredient (API) manufacturing plant in 2021.
However, due to funding constraints and regulatory bottlenecks, progress has stalled, with project completion under 50%. Once completed, analysts said they expect the project to strengthen Emzor’s market position and reduce its reliance on imported APIs for production.
According to GCR, Emzor raised NGN13.729 billion in Series 1 Bond in January 2021 through a special purpose vehicle, Emzor Pharma Funding SPV Plc.
The Series 1 Bonds are direct, unconditional, senior, unsubordinated, and unsecured obligations of the issuer and shall at all times rank pari passu and without any preference among themselves.
The ratings note highlighted that the principal will be fully redeemed at the maturity date through a bullet payment on 26 January 2026, but interest is payable semi-annually.
“Given that Emzor in its capacity as the Bond sponsor offers timely and full coverage of all payments due to the Series 1 Bondholders, through a Deed of Covenant, the Series 1 Bonds bear the same default risk as Emzor and would reflect similar recovery prospects to its senior unsecured creditors in the event of a default.
“As such, the rating of the Series 1 Bonds is equivalent to Emzor’s long-term senior unsecured corporate rating. We have received and reviewed the Trustees’ bond performance report as at 05 August 2025, which indicates that coupon payment has been regular, and there is no breach of the terms and conditions as stated in the bond trust deed”.
GCR stated that the Rating Watch Negative is in respect of the potential for a liquidity event should the NGN13.729 billion bond maturing in January 2026 not be redeemed or refinanced timeously. “We could review the outlook once a long-term refinancing arrangement has been concluded,” ratings analysts said. Access Holdings Lost 6.5% as Investors Sentiment Deteriorates
