July 26, 2023/FSDH Research

FSDH Initial Reaction: Cadbury Nigeria 2Q23 results 
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Key Performance Highlights:

• Cadbury Nigeria reported 2Q23 revenue of N19 billion, marking a significant YoY increase of 26.2% from N15.1 billion in 2Q22, mainly driven by high domestic demand (up 28.4%), slightly offset by a drop in exports. Domestic Revenue experienced significant YoY growth, reaching N18,819 million in 2Q23, compared to N14,654 million in 2Q22. Compared to 1Q23, domestic revenue increased by 17.1%. Export Revenue reached N226 million in 2Q23, compared to N434 million in the prior year quarter. The Cost of Sales decreased by 5.2% YoY, standing at N11.82 billion in 2Q23. However, compared to the previous quarter, it increased by 15.9%. Gross Profit experienced substantial growth, reaching N7.22 billion in 2Q23, a remarkable YoY increase of 175.5%. Other Income declined significantly from N9 million in 2Q22 to a loss of N3.4 billion in 2Q23. Selling and Distribution Expenses increased by 26.5% YoY, totaling N1.81 billion in 2Q23. Administrative Expenses also saw a substantial YoY increase of 96.2%, reaching N544 million in 2Q23. Compared to the previous quarter, the expenses surged by 109.3%. Results from Operating Activities amounted to N1.52 million in 2Q23, reflecting a YoY growth of 64.2%. However, compared to 1Q23, there was a sharp decline of 66.6%. Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) increased by 44.7% YoY, reaching N1.9 billion in 2Q23.
   
• Net Finance Income turned from a gain of N218 million in 2Q22 to a loss of N21 billion in 2Q23, representing a significant negative change. The Company incurred a significant loss of N20.9 billion, primarily caused by a substantial write-down due to the impact of the naira unification on its loans. Cadbury holds forex-related loans with interest rate components denominated in dollars, which resulted in losses. The depreciation of the naira, from approximately N460/$1 to about N790/$1, was the key factor that triggered the forex losses. Profit before income tax drastically declined to a loss of N19.5 billion in 2Q23, in contrast to a profit of N1.14 billion in 2Q22. The Company reported a net income tax credit of N1.48 billion in 2Q23, compared to an expense of N343 million in 2Q22. Consequently, the Company recorded a net loss of N18 billion in 2Q23, in contrast to a profit of N800 million in 2Q22. The Company reported a Loss Per Share of N9.58 in 2Q23 versus an Earnings Per Share of N0.43 in 2Q22.
   
• Gross Margin showed a substantial improvement, reaching 37.9% in 2Q23, compared to 17.4% in 2Q22. However, compared to 1Q23, it declined slightly by 47 basis points (bps). EBITDA Margin experienced growth, standing at 10.1% in 2Q23, up from 8.8% in 2Q22. Operating Margin also improved to 8.0% in 2Q23, up from 6.1% in 2Q22. Net Margin took a severe downturn, plunging to -94.5% in 2Q23, in contrast to 5.3% in 2Q22.
   
• Refreshment Beverages experienced YoY growth of 20.7%, reaching N13.3 billion in 2Q23. Compared to 1Q23, revenue from this segment grew by 14.0%. Confectionery also saw a YoY growth of 22.6%. Compared to the previous quarter, revenue from this segment increased by 18.0%. The biscuit segment generated revenue of N194 million in 2Q23, showing a significant decline of 39.7% YoY. Intermediate Cocoa products generated revenue of N953 million in 2Q23 versus N393 million in 1Q23.

Market Reaction: The market reaction to Cadbury Nigeria’s 2Q23 results was subdued as the stock closed 10.0% down at N15.3 versus a 0.46% loss for the All-Share Index (26/7).

Cadbury Nigeria Earnings Highlights 2Q23

Source: Company Financials, FSDH