24/10/2018/Cordros Report
Event: CADBURY just published September 30 2018 result with net profit of NGN600 million in Q3. This overturned the loss of NGN420 million in H1-2018 to NGN170 million profit in 9M 2018 (9M-2017: NGN60 million loss). The NGN680 million pre-tax profit in Q3 beat the NGN560 million we estimated, and is the company’s highest since Q3-2017.
- Revenue performance was a positive surprise. Growth was 16% y/y and 1% q/q in Q3, and beat our estimate by 5%. Compared to Q2-18, domestic sales grew marginally while exports declined. Compared to last year (LY) however, export growth was much stronger in the Q3 (39%) and 9M (+75%) periods. Sales in the local market grew by 13% in Q3-18 vs. LY, but has grown by only 4% YtD. According to some of the distributors we spoke with, there has been fairly good demand for 3-in-1 Hot Choco thus far this year, and consumers are increasingly aware of the gums (Cloret and Trident).
- Gross profit margin recovered from 11% in Q2 to 26.5% in Q3– in line with the 26.1% we estimated. The local prices of the company’s beverages and candies have been largely stable YtD from our routine market checks and local sugar price is softer compared to LY (-18% YtD). Though cocoa prices are up more than 17% YtD, it appears CADBURY’s backward integration via Stanmark is limiting the impact on production cost.
- Another positive in the latest result is the 2% decline in opex, with a ratio to revenue of 18%, vs. 22% in Q3-17. Compared to our estimate, opex was higher by 1%.
- Net finance cost of NGN110 million was reported during the three months period. Although finance cost (NGN130 million) was higher vs. Q3-17 (124% y/y), it reduced further from Q2-18 , and has now fallen consistently since the peak of NGN210 million in Q4-17. The balance of overdraft facilities (the only debt in CADBURY’s balance sheet) has reduced markedly to NGN1.7 billion, from NGN1.9 billion at the beginning of the year.
Comment: CADBURY’s Q3 performance was better-than-expected. Given the current result, we now look for higher 2018 earnings than we previously expected. We expect reaction to the result will be neutral. Our estimates are under review.
| Income Statement (NGN’bn) | 30-Sep-18 | y/y % ∆ | Q3-18 | Q3-y/y | Q3-q/q |
| Revenue | 26.96 | 10.6% | 9.41 | 16.1% | 0.9% |
| Cost of Sales | -21.65 | 14.3% | -6.91 | 22.0% | -16.8% |
| Gross profit | 5.31 | -2.2% | 2.49 | 2.5% | 145.8% |
| Operating expenses | -4.67 | -14.2% | -1.72 | -2.4% | 29.7% |
| Other income/(loss) | 0.04 | -22.0% | 0.01 | -54.9% | -445.0% |
| Operating profit | 0.68 | 1674.8% | 0.78 | 12.1% | -346.6% |
| Finance income | 0.10 | -22.4% | 0.03 | -57.7% | -44.2% |
| Financial charges | -0.53 | 127.9% | -0.13 | 124.0% | -26.9% |
| Profit before tax | 0.25 | -492.2% | 0.68 | -3.6% | -248.6% |
| Tax charges | -0.08 | -0.08 | -956.4% | ||
| Profit after tax | 0.17 | -366.8% | 0.60 | -15.1% | -233.6% |
