FSDH Initial Reaction: Cadbury Nigeria 1Q23 results 
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April 26, 2023/FSDH Report

Key Performance Highlights:

• Cadbury Nigeria reported strong all-around performance in 1Q23 as the company’s revenue jumped 29.5% YoY to N16.6 billion in 1Q23, and the net profit also ballooned 124.0% YoY to N3.5 billion in 1Q23. Moreover, Cadbury’s revenue growth for the quarter beat Unilever’s 19.7% YoY revenue growth. The company’s revenue growth was driven by Refreshment Beverages (+28.2% YoY), Confectionary (+14.8% YoY), and Intermediate Cocoa products (+35.0% YoY). With the solid revenue growth and less than proportionate increase in the cost of sales (+6.8% YoY), the company’s gross margin expanded by 1311 bps YoY to 38.4% in 1Q23.
   
• The selling & distribution expenses surged 53.2% YoY to N1.6 billion, while the administrative expenses declined 16.6% YoY to N260 million in 1Q23. The company’s other income fell to N10 million in 1Q23 compared to N17 million in the prior year. The company’s net finance income grew 36.3% YoY to N380 million (1Q22: N279 million), primarily due to the higher interest income from bank deposits. The company reported a significant 124.0% YoY rise in the profit before income tax, while the effective tax rate remained flat at 30.0% in 1Q23. Consequently, Cadbury reported a 124.0% YoY spurt in net profit to N3.5 billion in 1Q23 compared to a net profit of N1.5 billion in 1Q22. Cadbury Nigeria’s earnings per share increased to N1.84 in 1Q23 versus N0.82 in 1Q22.
   
• Looking at the margins and operating performance, the company’s margins across the board rose significantly in 1Q23, and the company’s EBITDA soared 116.7% YoY to N4.9 billion in 1Q23, compared to an EBITDA of N2.3 billion in 1Q22. Geography-wise, domestic revenues maintained the upward trend with a 30.4% YoY revenue growth to N16.1 billion, and exports witnessed a growth of 5.1% YoY to N489 million in 1Q23. Segment-wise, the company’s Refreshment Beverages reported a profit before tax of N3.5 billion (+121.8% YoY), the Confectionary segment reported a profit before tax of N1.2 billion (+98.5% YoY), the Biscuit segment reported a profit before tax of N180 million and the Intermediate Cocoa products segment’s profit before tax increased 133.5% YoY to N117 million.
   
• Looking at the sequential performance, Cadbury Nigeria reported revenue of N16.6 billion, a 30.7% QoQ revenue growth in 1Q23. Furthermore, the cost of sales decreased by 23.2% QoQ to N10.2 billion. Although the company recorded administrative expenses of N260 million (up 69.9% QoQ), the selling and distribution expenses were down 32.4% QoQ to N1.6 billion compared to N2.3 billion in 4Q22. As a result, the company’s profit for the period widened to N3.5 billion in 1Q23, compared to a loss of N1.9 billion in 4Q22.
   
• On 24 March 2023, the Board of Directors proposed a final dividend of 0.40 Kobo for every share for the period ended on 31 December 2022, subject to appropriate withholding tax to shareholders whose names appear in the Register of Members as at the close of business on Tuesday, 4 June 2023.

Market Reaction: The investor reaction to the robust 1Q23 results was subdued as the stock remained unchanged at N10.20 versus a 0.49% gain for the All-Share Index (25/4).

Cadbury Nigeria Earnings Highlights 1Q23

Source: Company Financials, FSDH