Fourth quarter loss plunges Cadbury’s full year profit to N830m

Cadbury Nigeria suffered a loss of N683 million in the final quarter of 2021 — which changed the company’s earnings story year-round. From an outstanding leap of 77 percent in profit to N1.5 billion at the end of the third quarter, the beverage and confectionaries manufacturing company ended the year with profit down by 11 percent to N830 million.

The company’s unaudited financial report for the year shows that the loss in the fourth quarter arose from an unusually high selling and distribution cost. The cost of selling and distribution has been growing ahead of sales revenue in recent years and took a turn for the worst in the final quarter of the 2021 financial year.

At about N1.7 billion for the final quarter, selling and distribution expenses exceeded gross profit for the quarter by N780 million. Further strain came from administrative expenses that went close to doubling quarter-on-quarter to N472 million.

The two cost increases resulted in an operating loss of N1.2 billion for the company in the fourth quarter. A net finance income of N274 million and a tax credit of roughly N293 million helped to cut the loss to N683 million for the quarter.

It was a highly volatile year for Cadbury on earnings performance in 2021. From a drop of 62 percent in after tax profit to N241 million in the first quarter, the company reported a loss of N861 million in the second quarter.

Its star performance happened in the third quarter when an after tax profit of N2 billion enabled it to overwrite a closing loss position of N516 million at half year.

The upswing in the third quarter was powered by cost savings moves across the board, particularly input cost. Cost of sales slowed down drastically to a marginal increase of 2 percent in the third quarter against an increase of 16.6 percent in turnover quarter-on-quarter.

The situation overturned in the final quarter when the substantial cost saving from cost of sales disappeared. Input cost grew closely with sales at 25.4 percent to N11.4 billion for the quarter compared to 28 percent growth in sales to N12.3 billion for the quarter.

Cost of sales claimed 93 percent of turnover in the final quarter, rising from 70 percent in the third quarter. The final quarter accounted for 32 percent of the closing cost of sales for the year, amounting to about N36 billion.

The result is a sharp fall in the quarterly gross profit figure from N3.4 billion in the third quarter to N882 million in the final quarter.

The company’s full year numbers show a turnover of N42.4 billion, which is an increase of 19.6 percent over the closing figure of N35.4 billion sales revenue it posted at the end of 2020. This has lifted sales revenue to a new peak for Cadbury after a drop of 10 percent in the preceding financial year.

With the strong growth in cost of sales in the final quarter, the full year position shows stronger growth than sales at 21.5 percent to N35.9 billion. That limited the increase in gross profit to 10 percent to close at N6.5 billion for the year.

The gross profit figure was largely consumed by selling and distribution expenses of over N5 billion for the year and administrative cost of N908 million.

A net finance income of N607 million provided the larger part of the closing profit of N830 million for Cadbury Nigeria in 2021. This is a drop of 11 percent over the closing profit figure of N932 million in 2020.

The company is down for the second year on profit, having lost ground also in 2020 when profit went down from over N1 billion in 2019.