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Cadbury rebuilds profit, raises hopes for full year

Cadbury Nigeria has wiped off a loss of N424 million it recorded at the end of its half year trading in June. A profit of close to N600 million in the third quarter saw the company out of the red into a net profit of N172 million at the end of September.

This presents a new strength for the beverage and confectionaries manufacturing company that raises hopes for a big leap in profit at full year. Last year, the company turned a third quarter loss into a full year profit. This year, it has built profit from third quarter and looks quite good to multiply last year’s net profit of N299 million about three times.

Cadbury’s challenge remains rising cost of sales that erode gross profit margin in a slowly growing sales revenue situation. The company closed the third quarter operations in September 2018 with sales revenue of slightly below N27 billion. This is a year-on-year improvement of 10.7%, accelerating from less than 8% at the end of June.

Cost of sales continues to grow ahead of turnover at over 14% to N21.65 billion over the same period. That caused a decline of 2.2% in gross profit to N5.30 billion at the end of the third quarter, improving however from 7% drop at half year.

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Revenue from domestic sales of beverages was flat at the end of the period. The growth so far recorded in sales revenue is driven exclusively by a 75% expansion in export sales amounting to over N4 billion at the end of September.

The full year outlook is promising to see turnover in the region of N37 billion for Cadbury in 2018. That will be a new peak in sales revenue – 12% up on the 2017 closing and beating for the first time in six years the existing 2013 revenue high of N36 billion.

The change in fortunes so far this year is coming from cuts in selling/distribution expenses and administrative cost. Selling/distribution expenses went down by 12% and administrative cost dropped by 20% year-on-year at the end of the third quarter.

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The reductions empowered the company to lift operating profit from only N38 million in the same period last year to N679 million at the end of September. That also enabled it to overwrite an operating loss of about N106 million at the end of half year.

Rising finance expenses continues to pose a major challenge in the company’s operations. Net finance cost multiplied more than four times to over N426 million at the end of the third quarter, consuming 63% of operating profit.

Rising finance cost is despite a continuing reduction in the company’s balance sheet debts. Cadbury’s interest bearing debts have continued to drop from N3.6 billion at the end of 2017 to N2.37 billion at the end of June and further to N1.66 billion at the end of September.

The company closed the third quarter with an after tax profit of about N172 million, a rebound from a loss of over N64 million in the same period last year. The profit came all within the third quarter when a profit of N595.72 million wiped off a loss of N424 million at half year.

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Another strong performance is expected of the company in the final quarter, raising hopes for a full year profit in excess of N800 million for Cadbury in 2018. The company closed last year’s operations with a net profit of N299 million.

The company earned 9 kobo per share at the end of the third quarter, a rebound from a loss of 3 kobo per share in the same period last year. Earnings per share is expected to be in the region of 40 for Cadbury Nigeria at the end of 2018. It earned 16 kobo per share in 2017 and gave it all out to shareholders in cash dividend.

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