Recently, Cadbury Nigeria plc released its results for the first-quarter (Q1) period ended March 31, 2016. The Q1’16 results of the Company which manufactures and markets cocoa-based beverages, confectionery and food products came in well above most analysts’ forecasts.
Before now, market watchers were skeptic about consumer companies’ earnings growth in 2016 as developments in the Nigerian economy continue to shrink Nigerians wallets and their spending powers.
Cadbury Nigeria plc unaudited interim financial information for the first quarter ended March 31, 2016 released to investors at the Nigerian Stock Exchange (NSE) shows the company revenue grew to N7.121billion from N6.731billion in Q1’2015. Gross Profit rose to N2.380billion from 2015 corresponding quarter lows of N1.691billion.
In Q1’16, Cadbury Nigeria plc selling and distribution expenses declined to N1.274billion from N1.430billion in the corresponding quarter of 2015. Likewise, the company’s administrative expenses declined to N470.944million from N598.102million. Finance income rose to N54.136million from N30.423million in Q1’15.
The above numbers in the review first-quarter signpost Cadbury Nigeria plc recorded cost cutting success, raising investors’ hopes for a further turnaround after its profit dropped to the lowest figure at the end of 2015.
From a loss before income tax of N303.520million in Q1’15, Cadbury Nigeria plc recorded a profit before income tax of N693.630million in Q1’16; and after tax profit for the period stood at N672.822million. Basic earnings per share rose to 36kobo from loss per share of 16kobo.
“The topline growth suggests that the company’s recent investment in its manufacturing plant, which management expects to increase Bournvita production by around 30%, may be paying off. As such, sales growth may feature through the rest of the quarters in 2016. The stock gained 21.7% last week (+19.5% ytd vs. -3.5% ytd for the NSE). We rate the stock underperform; our estimates are under review,” according to Kingston Nwosu team of research analysts at FBNQuest. The company looks good for further positive surprises in 2016, analysts observed.
Cadbury Nigeria plc share price stood at N19.48kobo as at Tuesday after attaining a 52-Week high of N37.91kobo against 52-Week low of N12. The company is listed on the consumer goods sectors of the NSE under the food products –diversified sub sector. The market capitalisation of Cadbury Nigeria plc stood at N36.587billion as at Tuesday while shares outstanding also stood at 1,878,202,040 units. “The results came in well above our forecasts”, the analysts added.
The analysts noted that year 2015 was a difficult year for Cadbury. “The company struggled to boost topline growth through the quarters due to fierce competition from other Fast Moving Consumer Goods (FMCG) companies which were also vying for the reduced consumer disposable income. Cadbury’s major brand, Bournvita, still trails Nestle’s Milo in the beverage segment while TomTom, although a market leader in the confectionery space, is not a value product, the analysts noted.
In the full year to December 31, 2015, Cadbury Nigeria revenue dipped by 9 percent to N27.83 billion against N30.52 billion in the preceding year; while full year 2015 pretax profit dropped to N1.58 billion against N2.39 billion in 2014. The board recommended a gross dividend of N1.221 billion for the year ended December 31, 2015. The dividend, which translates to 65 kobo per share was recommended despite a fall in the full year bottom-line.
“While Cadbury’s topline grew (for the first time since Q3 2013) by 5.8percent year-on-year (y/y) to N7.1billion, PBT and PAT of N694m and N673m compare with losses in Q1 2015. The bottomline was boosted by an 830bp y/y expansion in gross margin and a reduction in operating expenses by-14.0% y/y. On a quarterly basis, sales grew by 5.5% q/q, while PBT and PAT declined by -54.9% q/q and -9.1% q/q respectively.
Iheanyi Nwachukwu
