Cadbury Nigeria PLC published its full year (FY) unaudited 2019 earnings report with topline increasing by 9.32% (y/y) to N39.32 billion from N35.97 billion in FY 2018, surpassing our forecast by N1.8 billion.
Revenue printed stronger majorly driven by stronger domestic sales. Cost of sales spiked by 11.04% (y/y), higher than revenue growth, thereby, gross profit thinned out in line with our forecast to settle at N8.22 billion (Forecast: N8.23 billion) vs N7.96 billion printed the corresponding period of 2018.
We anticipated margins to thin-out (-5.56%) largely due to increased operating cost compounded by shackled topline in light of stiffened competition. Contrary to our expectation, finance income returned a distance stronger on the back of improved interest on bank deposits for the period under review to settle at N185 million juxtaposed with N116 million printed in FY 2018.
On the flip side, Cadbury recorded no finance cost for the period to bolster Profit before tax substantially to print N1.54 billion compared to N1.22 billion in the corresponding period of 2018. Income tax expense for the period softened to settle at N277 million vs N399 million in FY 2018, consequently, profit after tax (PAT) settled 52.28% higher than FY 2018 to record N1.27 billion (forecast: 1.26 billion) in line with our FY 2019 estimate.
Thereby, earnings per share (EPS) printed 66 kobo per share vs 44 kobo reported FY 2018. We maintain a BUY recommendation on Cadbury shares following our valuation with a fair value estimate (FVE) of N11.6, representing 23% upside from current price levels.
Greenwich Research
