FSDH Initial Reaction: Cadbury Nigeria 3Q23 results 
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October 30, 2023/FSDH Research

Key Performance Highlights:

• Cadbury Nigeria reported a solid set of numbers in 3Q23. The company’s revenue jumped 60.9% YoY to N23.6 billion from N14.7 billion in 3Q22, mainly driven by high domestic demand (+50.4% YoY), further boosted by a rise in exports (+311.7% YoY). Domestic Revenue experienced handsome YoY growth, reaching N21.2 billion in 3Q23, compared to N14.1 billion in 3Q22. Compared to 2Q23, domestic revenue increased by 12.5%. Export Revenue grew 4.1x YoY to N2.4 billion in 3Q23, compared to N587 million in the prior year quarter. Sequentially, export revenue vaulted 10.7x during the quarter. The Cost of Sales increased by 44.3% YoY, standing at N17.5 billion in 3Q23. As the Cost of Sales grew proportionately lower than the revenues, the gross profit experienced substantial growth, reaching N6.1 billion in 3Q23, a remarkable YoY increase of 141.0%.
   
• Other Income increased from N54 million in 3Q22 to N60 million in 3Q23, a 9.6% rise. Selling and Distribution Expenses surged 14.0% YoY to N1.8 billion in 3Q23. Administrative Expenses also saw a substantial YoY increase of 44.1%, reaching N727 million in 3Q23. Results from Operating Activities amounted to N3.6 billion in 3Q23, reflecting a massive YoY growth of 672.1%. Moreover, compared to 2Q23, there was a sharp rise of 135.5%. In 3Q23, robust sales, along with disciplined cost management, resulted in 380.8% YoY EBITDA growth to N4.0 billion in 3Q23, while on a sequential basis, EBITDA growth was 109.3%.
   
• Net Finance Income came in at N720 million in 3Q22 compared to N215 million in 3Q23 due to a rise in interest income on bank deposits. On a sequential basis, the net finance income turned positive, as Cadbury Nigeria had incurred a significant FX loss of N20.9 billion in 2Q23, primarily caused by a substantial write-down due to the impact of the naira unification on its loans. Profit before income tax sharply rose to N4.3 billion in 3Q23, compared to N678 million in 3Q22. The company did not pay any income tax in 3Q23, compared to a tax expense of N204 million in 3Q22. Consequently, the net profit soared 804.8% YoY to N4.3 billion in 3Q23, compared to N475 million in 3Q22. Cadbury Nigeria reported an earnings per share of N2.29 in 3Q23 versus an earnings per share of N0.25 in 3Q22, a massive 804.8% YoY rise.
   
• Looking at margins, the company showed a substantial improvement across the board. Gross Margin expanded 856 bps YoY to 25.8% in 3Q23 (17.2% in 3Q22), EBITDA Margin added a massive 1133 bps YoY, standing at 17.0% in 3Q23 (5.7% in 3Q22), Operating Margin expanded 1200 bps YoY to 15.2% in 3Q23 (3.2% in 3Q22), and Net Margin took significant jump of 1497 bps YoY to 18.2% in 3Q23 (3.2% in 3Q22).
   
• On a segmental basis, Refreshment Beverages experienced YoY growth of 59.1%, reaching N16.2 billion in 3Q23. Compared to 2Q23, revenue from this segment grew by 21.8%. Confectionery also saw a YoY growth of 29.4% YoY to N5.3 billion in 3Q23. Compared to the previous quarter, revenue from this segment increased by 15.3%. The biscuit segment generated revenue of N243 million in 3Q23, showing a significant decline of 36.8% YoY, while the segment grew 25.0% on a QoQ basis. Intermediate Cocoa products generated revenue of N1.9 billion in 3Q23 versus N953 million in 2Q23, a 94.8% QoQ rise.

Market Reaction: The market reaction to Cadbury Nigeria’s 3Q23 results was muted as the stock remained unchanged at N12.60 versus a 0.18% loss for the All-Share Index (26/10).

Cadbury Nigeria Earnings Highlights 3Q23