July 28, 2022/FSDH Research

Key Performance Highlights:

• Cadbury Nigeria reported a robust 57.1% YoY revenue growth in 2Q22 to N15.1 billion, while the net profit rocketed upward to N800 million in 2Q22, compared to a net loss of N861 million in 2Q21. Cadbury’s revenue growth continued to beat Unilever’s 43.3% YoY revenue growth this quarter as well. The company’s revenue growth was driven by Refreshment Beverages (+68.3% YoY) and Confectionary (+39.1% YoY), partially offset by Intermediate Cocoa products (-10.2% YoY). However, the company successfully contained rising costs, with the cost of sales rising a relatively lower 39.9% YoY, thereby expanding gross margins by a massive 1020 bps YoY to 17.4% in 2Q22.
   
• The selling & distribution expenses climbed merely 3.7% YoY to N1.4 billion, and the administrative expenses increased by 7.8% YoY to N277 million in 2Q22. The company recorded other income of N9 million in 2Q22, compared to N13 million in the prior-year quarter, primarily due to lower gain on disposal of property, plant, and equipment, partially offset by higher insurance claims received. The company’s net finance income jumped 206.2% YoY to N218 million (2Q21:N71 million), primarily due to a spurt in the interest income from bank deposits to N327 million in 2Q22 from N111 million in 2Q21, partially offset by a 173.2% YoY jump in interest expense on borrowings to N108 million in 2Q22 (2Q21:N40 million). Consequently, Cadbury reported a net profit of N800 million in 2Q22 compared to a net loss of N861 million in 2Q21. Cadbury Nigeria reported earnings per share of N0.43 in 2Q22 versus a loss per share of N0.46 in the prior year quarter.
   
• Talking about the margins and operating performance, the company’s margins expanded substantially. The company reported depreciation and amortisation of N402 million in 2Q22 resulting in an EBITDA of N1.3 billion in 2Q22, compared to a negative EBITDA of N572 million in 2Q21. Moreover, the company witnessed a significant rise in the profit before tax in all three segments, led by Refreshment Beverages (N845 million), followed by Confectionary (N275 million), and Intermediate Cocoa products (N23 million) in 2Q22. Geography-wise, domestic revenues maintained the upward trend with a 58.3% YoY revenue growth to N14.7 billion, followed by exports soaring 25.4% YoY to N434 million in 2Q22.
   
• Looking at the sequential performance, Cadbury Nigeria reported a solid 18.0% QoQ revenue growth in 2Q22, which was marred by the 30.5% QoQ jump in the cost of sales to N12.5 billion in 2Q22. The increase in the cost of sales was driven by the rising inflationary pressures in the economy. Hence, the gross profit sank by 18.9% QoQ to N2.6 billion in 2Q22, versus N3.2 billion in 1Q22. The company recorded a significant 40.6% QoQ rise in selling and distribution expenses to N1.4 billion, while the net finance declined 21.8% QoQ. As a result, the company recorded a 48.1% QoQ drop in profit after tax to N800 million in 2Q22, compared to N1.5 billion in 1Q22.

Market Reaction: Investor reaction to the solid 2Q22 results was muted as the stock remained unchanged at N17.10 (27/7), versus a 0.50% loss for the All-Share Index (27/7).

Cadbury Nigeria Earnings Highlights 2Q22

Source: Company Financials, FSDH