Pre-tax losses for the second quarter of 2024 were announced by Cadbury Nigeria Plc at N3.423 billion, a considerable decrease from the N10.457 billion loss for the first quarter.
Due to this, the half-year 2024 loss has decreased to N13.880 billion, or 4.5% less than the loss incurred during the corresponding time in 2023. The company’s 2023 pre-tax loss of N28.157 billion was in sharp contrast to its 2022 pre-tax profit of N1.298 billion.
H1 2024 Over H1 2023 Witnessed
- Revenue: N51.440 billion +44.46% YoY
- Cost of sales: N41.853 billion +64.92% YoY
- Gross profit: N9.587 billion -6.28% YoY
- Administrative Expenses: N1.255 billion +59.09% YoY
- Selling & Distribution Expenses: N3.389 billion +0.83% YoY
- Operating Profit: N4.728 billion -22.14% YoY
- Foreign Exchange Losses: N15.766 billion -26.04% YoY
- Loss after tax: N9.716 billion -33.17% YoY
- Loss per share: N4.26 -44.96% YoY
- Cash & Cash equivalents: N14.135 billion -30.89%
- Total assets: N67.456 billion +6.35%
- Given the improved performance in Q2, Cadbury Nigeria Plc might be on a path to exit the loss recorded in 2023
Furthering, a number of variables will affect this result, such as sustained revenue growth, efficient cost control, foreign exchange loss hedging, and general market circumstances in 2024’s remaining quarters. There has been remarkable growth in revenue.
Revenue increased 46% YoY in Q2 to N27.745 billion, contributing to a 45% YoY growth in half-year revenue of N51.440 billion. Domestic sales, which accounted for more than 88% of the total income, were a major contributor to the revenue.
The significant impact of the high cost of sales has persisted even in spite of the great growth in revenue. The company’s second-quarter cost of sales for the year was N23.150 billion, a 95% year-over-year increase that increased the half-year cost to N41.853 billion, or more than half of the cost of sales for the full 2023 calendar year.
The decrease in gross profit and margin was a result of this. The gross profit margin fell by 350 basis points to 19% in H1 2024, despite the gross profit declining in both Q1 and Q2, which resulted in an overall year-over-year decline of 6.28% to N9.587 billion.
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BrandSpur business and economy news holds that FX losses have had a significant effect in addition to the high cost of overhead and sales. Over 80% of the N36 billion in foreign exchange losses the business reported in 2023 was realised.
The pattern persisted in the first quarter of 2024, with a realised foreign exchange loss of N13.4 billion in Q1 increasing the foreign exchange loss for the half-year to N15.76 billion.
The loss was mostly caused by this. In addition to the difficulties presented by high sales and overhead costs, these forex losses had a substantial negative influence on the company’s total profitability.
In essence, the company’s financial problems have been exacerbated by the adverse exchange rate swings, making it more difficult to produce profitable financial outcomes. For Cadbury Nigeria Plc, the fact that realised and unrealised FX losses were less in Q2 2024 than they were in Q1 2024 and 2023 is encouraging.
A larger portion of the foreign exchange losses were probably previously realised in Q1, which explains the comparatively low FX losses in Q2. By putting losses on the front end of the schedule now, Cadbury Nigeria Plc may better manage and mitigate future risks, which would assist the company’s financial performance in the next quarters of 2024.
For the remaining quarters of 2024, a positive trend in earnings may be aided by the continued trend of decreased foreign exchange losses. This could encourage a higher stock price and boost investor confidence. Compared to the 2023 YtD gain of 59.66%, CADBURY has had a bearish year with a YtD loss of 2.63%.
However, given its 7.46x price-to-book ratio, Cadbury is well-valued despite its current lack of profitability. This indicates high market expectations and a solid valuation based on future growth prospects, intangible assets, and positive market sentiment.
Investors are prepared to pay 7.46 times the book value. Long-term profitability, cost control, and general financial health must all show discernible improvements for Cadbury Nigeria Plc to warrant this high valuation. If the company doesn’t increase its profitability, lofty expectations might not come true and the high P/B ratio might become unsustainable.
