COVID-19 Wipes Off ₦1.1Bn In Profits For Cadbury Nigeria

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Cadbury Nigeria Plc, a major player in the Nigeria Consumer goods sector released its Audited Financial Statement for the year ended 31st December 2020 on the 30th of March 2021.

Cadbury Nigeria’s Profit-Before-Tax (PBT) and Profit-After-Tax (PAT) declined by 73% and 13% to ₦408.07 million and ₦931.83 million respectively, as against ₦1.54 billion and ₦1.07 billion in the corresponding period of 2019. The large difference between the PBT and PAT was driven by the claim of their deferred tax from 2019, which led to a major Income tax credit.

Earnings Analysis:

  • Due to the effect of Covid-19 pandemic lockdown, the Company’s Revenue for Full Year 2020 declined by 10% to ₦35.41 billion compared to ₦39.33 billion in FY’2019. This was due to a decrease of 6% and 36% in Domestic sales and Export sales to ₦32.29 billion and ₦3.11 billion respectively in FY’2020.
  • On the other hand, Cadbury Nigeria reported a 24% jump in Other Income to ₦108.04 million, as against ₦87.13 million in the corresponding Year of 2019, which was triggered by the sale of by-products and a 638% gain on the Disposal of PPE.

Cadbury Nigeria - Lockdown Easing Drive Q3’2020 Earnings Recovery

  • The Cost of Sales decreased slightly by 5% (from ₦31.00 billion to ₦29.51 billion). This was jointly driven by a 41% decrease in Advertising and Sales promotion, a 12% decrease in Selling and distribution expenses, and a 36% decrease in administrative expenses compared to the corresponding year of 2019.
  • Also, the Finance Income shrunk by 31% to ₦127.44 million, from ₦185.27 million compared to the previous year, while the Finance Cost grew by 6% to ₦1.20 million, from ₦1.14 million. This was attributed to a 31% decrease in Interest income on bank deposit and a 6% increase in Interest expense on leases.
  • As a result of the weak Revenue and high Finance Cost, in FY’2020, the company’s Profit-Before-Tax (PBT) and Profit-After-Tax (PAT) declined by 73% and 13% to ₦408.07 million and ₦931.83 million respectively, as against ₦1.54 billion and ₦1.07 billion in the corresponding period of 2019. The large difference between the PBT and PAT was driven by the claim of their deferred tax from 2019, which led to a major Income tax credit.
  • Consequently, the Earnings Per Share (EPS), settled at 50kobo per share; representing a 12% decrease compared to 57kobo in FY’2019.while a dividend of ₦0.49 was declared to the shareholders of the company.
  • The dividend per ordinary share of 49kobo was declared to the shareholders of the Company, amounting to ₦912.00 million compared to a dividend of 25kobo (₦471.00 million) the previous year. We believe the 98% declaration of EPS as a dividend is to retain investors’ confidence in the company.
  • Nevertheless, the Book Value Per Share (BVPS) of the Company dropped by 1kobo to settle at ₦7.21 compared to ₦7.22 in FY’2019 due to the 0.12% reduction in Total Shareholders Fund to ₦13.55 billion, from ₦13.57 billion in FY’2019.
  • Cadbury Nigeria Plc has a 99.66% stake in Cadbury Nigeria Plc Cocoa Processing Plant which sources cocoa powder for the manufacturing of Cadbury Bournvita. Mondelez International has a majority equity interest of 74.97% in Cadbury Nigeria Plc through its holding in Cadbury Schweppes Overseas Limited. The remaining 25.03% equity ownership is held by a diverse group of Nigerian individuals and institutional shareholders. Cadbury Nigeria Plc’s head office is in Lagos, Nigeria.
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Liquidity Ratio printed strongly

  • The Company’s Liquidity ratio – Cash Ratio rose by 71% in the Year to 0.77 compared to 0.45 in the corresponding Year of 2019. This was aided by a 151% increase in cash and cash equivalents; a 123% increase in Bank balances and a 193% increase in Call deposits.

Conclusion

  • CADBURY closing share price on 31/3/2021 was ₦8.25 settling above it BVPS ₦7.21, we maintained a HOLD recommendation on the stock.

Cadbury Nigeria Plc manufactures and markets a range of chocolate malt drink mixes, sweets, powder beverages and chewing gums in Nigeria. The company was established in the 1950s to source cocoa beans from Nigeria for the Cadbury Group; it then branched into re-packing imported bulk products and grew rapidly into a fully-fledged manufacturing operation producing a range of popular Cadbury brands.

Cadbury Bournvita is the company’s flagship product which is a brand of malted and chocolate malt drink mixes that has energy and nutritional properties.

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The company introduced other Cadbury brands into its range in the 1970s; TomTom, a large black and white sweet for soothing relief; Cadbury Buttermilk, a delicious sweet with butter and mint flavour; Tang, a popular powdered beverage; and Clorets and Trident, brands of chewing gum.

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