Cadbury Nigeria plc, one of the 30 largely capitalised equities at the Nigerian Stock Exchange (NSE), recently released its first-quarter (Q1) results to investors and analysts at the Lagos bourse.
The company’s statement of comprehensive income for the Q1 ended March 31, 2015, revealed a 3 percent decline in its revenue, which stood at N6.731 billion as against the corresponding Q1 2014 revenue at N6.920 billion.
The cost of sales, which is the direct costs attributable to the production of the goods sold by Cadbury for the Q1’15, rose by 24 percent to N5.040 billion from N4.061 billion in Q1’14.
Cadbury reported a loss before tax (LBT) N303.520 million, a decline of 126 percent from a record profit before tax (PBT) of N1.151 billion in corresponding Q1’14.
“This is the fifth consecutive quarter in which Cadbury profitability has deteriorated. A gross margin contraction of -1619basis points (bps) year-on-year (y/y) to 25.1 percent more than offset any benefits from a flattish opex line to lead to the loss,” according to Lagos-based FBN Capital Limited, financial analysts.
“We suspect the devaluation of the naira was the primary driver behind the relatively weaker gross margin, given that Cadbury is heavily reliant on inputs of key raw materials such as sugar, milk and cocoa. Sequentially, sales and PBT declined by 6.6 percent q/q and 67.3 percent q/q, respectively. The PBT decline was exacerbated by a 334 percent q/q rise in opex,” the FBN Capital analysts said.
They believe that Cadbury’s topline, like most other consumer names, continues to face headwinds such as weaker consumer demand, increased competition and poor sales in the North due to insecurity.
“Even though prices of Cadbury’s key raw materials, cocoa and sugar, declined by -18 percent and -6 percent, respectively, between end-December 2014 and end-March, the results still reflect the negative impact of the recent devaluation of the naira,” the financial analysts said.
Cadbury Nigeria plc is listed on the main board of the NSE under the food products-diversified subsector of the consumer goods sector. The company’s market capitalisation is in excess of N74.940 billion with shares outstanding of 1,878,202,040.
At the beginning of stock trading this week, Cadbury share price closed at N39.9 kobo from N39.25 kobo the preceding Friday. It had achieved a 52-week high of N81.89 and a 52-week low of N34.82.
The first-quarter (Q1) statement of comprehensive income further indicated a basic loss per share of 16 kobo, a decline of 138 percent from a basic earnings per share of 43 kobo in the corresponding Q1’14 period.
“Cadbury shares have outperformed the index this year, gaining 5 percent ytd compared with -1.5 percent for the NSE ASI. They may come under some pressure as a result of these results,” the financial analysts said in their first reaction shortly after Cadbury Nigeria released its Q1’15 results on the NSE.
Iheanyi Nwachukwu
