Cadbury Nigeria Plc released its 2022 Q3 results reporting a profit of N474.877 million, a 76.61% decline year-on-year.
The result is on the back of an inflationary year, occasioned by supply chain disruptions and rising energy costs, where FMCG companies have had to deal with rising production, marketing, and distribution expenses.
The unaudited results also showed that the Q3 22-on-year decline in profit was driven by lower margins as cost of sales soared. Specifically gross margins fell to 17.1% during the quarter compared to 29.5% in the same period one year ago.
Revenue pop: a closer look at the results showed that revenue rose by 27.23% to N14.663 billion in Q3 2022 compared to N11.525 billion during the same period last year.
- The results also showed that the revenue growth was driven by a rise in revenue from the company’s two major product lines; Refreshment Beverages and Confectionery.
- Most consumer goods companies have been able to report higher sales due to upward price adjustments. We believe this is also the case with Cadbury.
- Most of the revenue growth recorded was however gobbled up by rising direct cost and operating expenses.
Other key financial highlights
- Cost of sales grew by 50.31% from N8.078 billion in 2021 to N12.142 billion in 2022.
- Gross profit dipped by 26.84% to N2.522 billion in Q3 2022 from N3.447 billion recorded a year earlier.
- Selling and distribution expenses grew by 44.56% to N1.609 billion in Q3 2022 from N1.113 billion in Q3 2021
- Administrative Expenses rose to N504.389 million from N95.168 million, a 439% growth year-on-year
- Operating profit dipped by 81.01% to N463.280 billion in Q3 2022 from N2.439 billion recorded in Q3 2021
- Overall basic earnings per share dipped by 76.61% to 25.08 from N108.06 in Q3 2021.
CGS cost pressures: Cadbury Nigeria Plc is listed on the Nigerian Stock Exchange (NGX) under Consumer Goods Sector (CGS).
- The CGS currently is bogged with financing and operating costs, worsened daily by rising inflation, unemployment, and underemployment, resulting in a reduction in the demand for its products with the consequent effect on revenue and profits.
- Consequently, the CGS Index, according to data sourced from NGX, showed a -3.65% YTD share price return as of October 31, 2022.
- The increase in the cost of sales and administrative expenses has impacted heavily on Cadbury’s bottom line and is likely to continue in Q4 2022. This expectedly would affect investors’ sentiment.
Related Party: Cadbury conducts a significant about businesses with its related parties. For example, out of its N16 billion external loans, about N10 billion are intercompany loans.
Cash flow: Cadbury generated about N1.7 billion in free cash flow from operations in addition to the N17 billion it opened the year with.
- It then went on to borrow N6 billion to finance imports and spent However, it has only spent N1.8 billion of it to finance imports.
- Another N2.8 billion was spent on property plants and equivalents.
- The company closed the quarter with a cash balance of N23.8 billion which in context is significantly higher than its equity of N15.5 billion.
CADBURY’s share price has been volatile and more volatile than 75% of the NG stocks over the past three months, typically moving +/- 7% a week.
- Although its share price has gained 31.8% YTD, investors should take caution about its recent performance, having lost 8% of its value in the past four weeks.
- Cadbury’s healthy cash balance also helps its valuation of N21.2 billion,
