Genomma Lab Internacional SAB, the Mexican seller of remedies for acne and baldness, is ending a buying spree and plans to reduce debt after at least 10 acquisitions since 2008.
Chief Executive Officer Rodrigo Herrera, whose family holds about 30 percent of the shares, said in an interview that Genomma plans to license out at least 15 brands and use the extra cash to pay down debt and buy back shares.
“The best investment that we can make is in our own company, and not do any acquisitions right now,” Herrera said in an interview Friday.
The CEO is changing tack after his company’s stock tumbled 41 percent this year, the worst performance on Mexico’s benchmark IPC gauge. Earlier this year, Herrera returned from a stay in Spain after investors grew concerned he was spending too much time on a European expansion while sales tumbled in Mexico.
Genomma “has to re-establish its credibility with investors,” said Richard Dolhun, an analyst at Westwood International Advisors Inc., which oversees $5 billion in equities, including Genomma shares. “They have to be proactive, giving investors information to let the investment community know they’re working toward their stated goals.”
Genomma’s products include Cicatricure Scar Gel; Tio Nacho Mexican Herbs Shampoo, which purports to prevent baldness; and Silka Antifungal Cream, for cure athlete’s foot and jock itch.
Genomma shares have rebounded since June 22, when the company said it would sell a controlling stake in distribution unit Grupo Comercial e Industrial Marzam SAPI.
The stock rose 0.9 percent to 16.61 pesos at 1:49 p.m. in Mexico City.
Herrera said in the interview that Genomma was close to a brand-licensing deal that would raise cash to reduce debt and buy back shares. The 46-year-old CEO had said in March that Genomma would finish licensing out brands by June to focus on more “core” products.
The company’s net debt was 2.25 times earnings before interest, taxes, depreciation and amortization at the end of 2014, according to data compiled by Bloomberg. That was the highest since at least 2009. Herrera said he expects the ratio to fall to between 1.75 and 2 by the end of 2015.
In March, Genomma said total free cash flow would more than double in 2015 to 2.63 billion pesos ($164 million), with 500 million pesos earmarked for a share-buyback fund. Herrera said he’ll present a plan to the board Thursday to buy back hundreds of millions of pesos of shares this year under a previously authorized program.
“One of the reasons one could see an improvement is an increasing confidence in Rodrigo’s leadership, which was certainly questioned,” said Howard Jackson, president of financial research and consulting firm HSA Consulting LLC, which covers Genomma.