On Thursday morning, The Female Health Company (FHCO) announced that it won an exclusive contract to supply up to 50 million of its FC2 Female Condoms to the Brazilian Ministry of Health. Although the pricing of the condoms was not disclosed, this certainly is a positive for FHCO. Additionally, FHCO is discussing plans to create a local production facility in Brazil for FC2 which could allow for margin expansion.
Moreover, earlier in the day Thursday, FHCO announced its preliminary sales for the fourth quarter of fiscal 2014. The company announced a 15% increase in sales from the same period last year, to 9.7 million units. CEO Karen King commented on the positive release: "As part of our new strategy announced in July, the company is ramping up sales and marketing efforts for FC2, and we anticipate that these efforts will drive future demand for the product. We plan to focus particularly on the U.S., which represents a small percentage of total FC2 sales today." FHCO has relied on non-profits to order their products for philanthropic efforts, but the company has begun to pivot its strategy. If FC2 gains traction in the consumer segment, the company will see revenue growth accelerate quickly.
In my previous article, "The Female Health Company: Misunderstanding Leads To Undervaluation," I opined that FHCO was poised for growth due to its revamped business model. It halted its dividend, and began investing in marketing and new products. I would not be surprised to see the consumer segment of sales begin to accelerate over the coming months, and FHCO may diversify its product offerings through an acquisition or two. The market is myopic and sold off FHCO after the dividend was rescinded, but for long-term investors, FHCO was and continues to be a prudent investment.
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