Cadbury Nigeria’s Earnings Jumped on Healthy Rebound in Revenue
Cadbury Nigeria Plc reported more than 31% increase in after tax profit that was supported by other income line and lower finance cost in the period.
Unaudited financial statement for 9-months shows that Cadbury Nigeria earned ₦0.45 on every shares used in financing its operation, though third quarter saw a moderation.
In its equity note, analysts at CSL Stockbrokers stayed neutral on the company’s share despite revenue rebound in the third quarter of 2020.
In its 9-month financial year result however, there was significant drop in topline performance when compare with comparable period in 2019.
Total revenue slipped of the track by about 11% year on year, printed at ₦25.796 billion from ₦28.912 billion in the comparable period in 2019.
The pressure in the fast moving consumers sector had persisted following the outbreak of coronavirus pandemic.
So, coming out strong in the third quarter signposts possible revenue recovery to pre-pandemic level.
Commenting on the results, analysts said downward slope in demand was driven by economic lockdown, largely.
Cadbury Nigeria’s healthy rebound in third quarter of 2020 raised revenue 34.2% quarter on quarter to ₦9.9 billion from ₦7.4 billion in the second quarter of 2020.
“Cadbury’s product portfolio left it vulnerable to the impact of the covid-19 restrictive measures, particularly its Confectionery business. Relaxation of these measures drove the significant recovery in Revenue”, CSL Stockbrokers said.
In Q3 2020, confectionery revenue rose 136.1% quarter on quarter to ₦3.5billion.
Refreshment beverage segment jerked up 16% quarter on quarter to settle at ₦5.8 billion.
However, intermediate cocoa products continued to lag, as the segment plunged 31.4% quarter on quarter to ₦0.6 billion in Q3 2020.
Nevertheless, CSL Stockbrokers said revenue across business segments remained weak on a year on year basis.
For example, on year on year basis the refreshment beverages tailed off 11.8% year on year to ₦15.3 billion, confectionary down 6.6% to ₦7.7 billion, & intermediate cocoa products declined 16.0% to ₦2.7 billion in 9M-2020.
Cadbury Nigeria’s cost of sales (ex-depreciation) declined faster than revenue, thereby strengthened the company’s margin.
In the period, cost of sales slope down 11.5% year on year to ₦19.7 billion in 9- 2020 from ₦22.3 billion in 9M 2019.
CSL Stockbrokers stated that reduction in cost of sales reflects lower commodity prices particularly of core inputs like cocoa and sugar used by Cadbury.
This fed into stronger gross margin in 9M 2020 which strengthened by 0.6 percentage points year on year to 23.6% from 22.9% in 9M 2020.
Despite this, weaker revenue resulted in a decline in gross profit, down 8.3% year on year to ₦6.1 billion in 9M-2020 from ₦6.6 billion in the correspondent period.
Also, operating expenses adjusted for depreciation declined significantly, as improved cost efficiency resulted in reduced selling & distribution expenses (ex-depreciation) and administrative expenses (ex-depreciation), down 13.6% and 35.3% to ₦3.1 billion and ₦0.7 billion, respectively.
Against this backdrop, EBITDA recovered significantly.
It surged 16.8% year on year to ₦2.3 billion in 9M-2020 from ₦1.9 billion in the comparable period in 2019.
EBITDA margin strengthened by 2.1 percentage points to 8.7% in 9M-2020 as depreciation and amortisation grew 2.7% to ₦1.2 billion.
CSL Stockbrokers said slower growth in depreciation and amortisation coupled with the healthy growth in EBITDA resulted in a 38.7% year on year growth in operating profit to ₦1.0 billion in 9M 2020 from ₦0.8 billion.
The company’s recorded a 24.9% year on year decline in finance income to ₦85.4 million in 9M 2020 from ₦113.8m in 9M 2019 due to the lower yield on bank deposits.
At the bottom line, Cadbury Nigeria profit before tax grew by 31.8% year on year to ₦1.2 billion in 9M-2020 from ₦925.8million recorded in the comparable period.
Meanwhile the company’s net income was lifted up 31.8% to ₦854.4 million from ₦648.0m in the comparable period in 2019.
Analysts noted the company reported a Profit of ₦317.7m in Q3 2020 compared with the loss of ₦102.3 million recorded in Q2 2020.
On the back of the improved performance, Cadbury Nigeria’s earnings per share rose to ₦0.45 in 9M-2020 from ₦0.35/s in 9M-2019.
All in, analysts at CSL Stockbrokers stayed neutral on the share as the firm generously handed hold recommendation.
“We have a HOLD recommendation on the stock with a target price of ₦12.77 per share”, CSL Stockbrokers advised investors.
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Cadbury Nigeria’s Earnings Jumped on Healthy Rebound in Revenue
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