The latest results released by Cadbury Plc, a Nigerian consumer goods firm, has validated analysts sell ratings for stocks operating in the Diversified Food Products sub-division of the Consumer Goods Section.
For the first nine months through September 2016, Cadbury Nigeria recorded a loss after tax of N842.15 million from a profit of N28.55 million, according to its financial statement, posted on the website of the NSE.
Sales increased by a mere 1.18 percent to N21.32 billion as consumers demand less of the company’s products on the back of rising inflation falling household income.
While Cadbury sources its entire cocoa requirement locally, the costs of other raw materials such as sugar and milk have increased as importers of the raw sugar shriek on the back of dollar scarcity and an increase in global sugar prices.
Consequently, the company’s cost of sales increased by 14.79% to N16.84 billion while total operating expenses of N5.45 billion wiped out the whole of N4.47 billion gross profit, resulting in an operating loss of N1.02 billion.
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Cadbury’s share price is down -23.44% ytd, which means investors are less bullish about the shares in the last one year. Its share price fell by 5 percent to touch down at N13.13 at the close of trading on Friday.
Cadbury’s unflattering performance has indeed validated analysts sell ratings on consumer goods stock as a severe dollar shortage, rising energy and input costs, depressed consumer spending and currency devaluation continues to undermine growth.
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PZ Cussons, a major player in the consumer goods space posted a loss after tax of N1.58 billion in the first quarter 31 August 2016, foreign exchange loss of N4.70 billion.
The shares of PZ Cussons Nigeria, which is majority-owned by the Manchester, U.K.-based soap-maker, have fallen 39 percent in the past year. That compares with a 9 percent drop for the Nigerian stock exchange’s benchmark index.
Diageo, the maker of Johnnie Walker Scotch and Smirnoff vodka said in an October 5 note that it will no longer proceed with an offer to increase stake in subsidiary Guinness Nigeria. The foreign firm said the harsh operating environment has left with no option than to focus on its core business.
The 2016 audited financial statement of Guinness Nigeria showed the company posted a loss after tax of N2.01 billion while sales dipped by 14 percent to N101.1 billion.
Analysts are inauspicious about the performance of companies as the earnings season kick starts given the challenges before them.
“Fast moving consumer goods firms numbers may not likely broadly be good on the back of depressed consumer spending power as well as the impact of naira devaluation on production costs,” said Tajudeen Ibrahim head of research of Chapel Hill Denham Limited