N11.5b foreign exchange loss plunges Cadbury Nigeria into loss for second year

Cadbury Nigeria Plc has reported a net foreign exchange loss of N11.5 billion for the first quarter, which plunged it into a loss of N7.3 billion for the quarter.

Foreign exchange losses are continuing to mount for the company in the current financial year after a foreign exchange loss of almost N37 billion built a net loss of over N19 billion at the end of 2023.

The first quarter financial report of the beverages and confectionaries company at the end of March 2024 shows it is facing operating pressure from the top to the bottom lines.

The strengths in the core operating activities seen in the prior financial year have disappeared so far this year.

Unlike last year, costs have sped up generally while revenue has slowed down, setting key earnings numbers dropping all the way.

The pressure in operations was further extended by the foreign exchange losses that were completely out of the way in the same quarter last year.

Last year’s loss had gulped retained earnings, created a retained deficit of N11.4 billion and sank shareholders’ funds into negative N6.5 billion.

The further loss recorded in the first quarter has jerked up the retained deficit to N25.8 billion but Cadbury has beefed up equity resources to achieve a positive equity base of N5.7 billion.

The increase in equity came from a conversion of an inter-company loan of $7.72 million owed to Cadbury Schweppes Overseas Limited into equity.

Sales revenue was up by 43 percent in the first quarter to N23.7 billion, sustaining a strong growth of 45.6 percent to N80.4 billion at the end of 2023.

However, production cost grew close to twice as fast as sales at 83.3 percent to N18.7 billion. This is an increase of N8.5 billion in cost of production compared to an increase of N7.1 billion in turnover.

The imbalance in cost-income growths is unlike in the preceding financial year when the company achieved a slower growth in the cost of sales than sales revenue at 33.7 percent to N63 billion against the 45.6 percent growth in turnover.

The cost incursion resulted in a drop in gross profit from N6.4 billion in the same quarter last year to less than N5 billion at the end of March 2024.

Gross profit had advanced by 124.5 percent at the end of last year to N17.3 billion.

Selling and distribution expenses went down slightly by 4.6 percent to roughly N1.5 billion but administrative costs jumped by 183.6 percent to N737 million over the review period. This was reinforced by an unusual drop from other income to other loss during the period.

The developments pressured operating activities, resulting in a drop of 39.4 percent in operating profit to less than N2.8 billion at the end of the first quarter.

This detracts from last year’s performance when the company achieved outstanding growth in operating profit from only N194 million in 2022 to N8.4 billion at the end of 2023.

Net finance cost of N13.2 billion, fueled by foreign exchange losses, is the critical development for Cadbury in the first quarter, which consumed operating profit and left a pre-tax loss of N10.5 billion at the end of the quarter.

The net finance cost figure is a deep plunge from net finance income of over N380 million in the same period last year.

Cadbury Nigeria reduced its borrowings from N43.2 billion at the close of 2023 operations to N29.1 billion at the end of the first quarter through debt forgiveness of an inter-company loan of $20 million owed to Cadbury Schweppes Overseas Limited.

An income tax credit of N3.1 billion came in quite handy to cut the net loss of the company to N7.3 billion for the first quarter, down from a net profit of N3.5 billion in the first quarter of 2023.