January 26, 2023/FSDH Research

FSDH Initial Reaction: Cadbury Nigeria FY22 results 
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Key Performance Highlights:

• After reporting massive topline growth over the first three quarters, Cadbury Nigeria posted lukewarm results in 4Q22. However, the company reported a strong 30.3% YoY revenue growth in FY22 to N55.2 billion, while the net profit also ballooned 110.4% to N0.9 billion in FY22. Moreover, Cadbury’s revenue growth for the year beat Unilever’s 25.8% YoY revenue growth. The company’s revenue growth was driven by Refreshment Beverages (+37.0% YoY) and Confectionary (+20.6% YoY), partially offset by Intermediate Cocoa products (-22.1% YoY). However, the company’s results were affected by rising costs, with the cost of sales rising 32.2% YoY, thereby contracting gross margins by 122 bps YoY to 14.1% in FY22.
   
• The selling & distribution expenses surged 25.5% YoY to N6.4 billion, and the administrative expenses also expanded 31.2% YoY to N1.2 billion in FY22. The company recorded other income of N82 million in FY22, compared to N24 million in the prior year, primarily due to gain on disposal of assets and higher insurance claims received. The company’s net finance income grew 82.1% YoY to N1.1 billion (FY21: N0.6 billion), primarily due to the higher interest income from bank deposits. The company reported a 23.1% YoY rise in the profit before income tax, further helped by a lower effective tax rate of 30.0% in FY22, down from 59.0% in FY21. Consequently, Cadbury reported a 110.4% YoY spurt in net profit to N946 million in FY22 compared to a net profit of N450 million in FY21. Cadbury Nigeria’s earnings per share increased to N0.50 in FY22 versus N0.24 in FY21.
   
• Talking about the margins and operating performance, the company’s margins contracted in FY22. The company reported depreciation and amortisation of N1.5 billion in FY22 resulting in an EBITDA of N1.7 billion in FY22, compared to an EBITDA of N1.9 billion in FY21. Geography-wise, domestic revenues maintained the upward trend with a 31.7% YoY revenue growth to N53.0 billion, and exports witnessed a growth of 3.0% YoY to N2.2 billion in FY22. Segment-wise, the company’s Refreshment Beverages reported a profit before tax of N940 million (+29.5% YoY), and the Confectionary segment reported a profit before tax of N371 million (+13.9% YoY). In comparison, the Intermediate Cocoa products segment’s profit before tax declined 26.4% YoY to N34 million.
   
• Looking at the quarterly performance, Cadbury Nigeria reported revenue of N12.7 billion, a marginal 2.8% YoY revenue growth in 4Q22 (underperforming Unilever’s 14.9% YoY revenue growth in 4Q22, with a wide margin). In comparison, the cost of sales increased 16.2% YoY to N13.3 billion. Although the company recorded administrative expenses of N153 million (down 67.6% YoY), selling and distribution expenses soared 38.5% YoY to N2.3 billion. As a result, the company’s loss for the period widened to N1.9 billion in 4Q22, compared to N0.7 billion in 4Q21.

Market Reaction: The investor reaction to the weak 4Q22 results was tepid as the stock remained unchanged at N11.85 versus a 0.29% gain for the All-Share Index at the close of the day on 26/1.

Cadbury Nigeria Earnings Highlights FY22

Source: Company Financials, FSDH