October 28, 2024/CSL Research

Cadbury Nigeria Plc. (Cadbury) reported a 51.2% y/y Revenue growth in its 9M 2024 earnings release, with Revenue climbing to ₦89.53 billion from ₦59.20 billion in 9M 2023. The topline growth is attributed to increases in both sales volumes and prices, as well as improved asset optimization. Across Revenue generating segments, Cadbury’s refreshment beverage segment (Cadbury bournvita, and Cadbury 3-in-1 hot chocolate) sustained its position as the top contributor, accounting for about 59.6% of total Revenue. Revenue from this segment grew by 29.9% y/y to ₦53.35 billion in 9M 2024, compared to ₦41.08 billion in 9M 2023, when it contributed around 69.4% to overall Revenue.

The confectionary and the intermediate cocoa product segments witnessed sizable growth, with y/y Revenue growths of 85.3% and 226.66% to ₦25.72 billion and ₦10.46 billion respectively. Domestic sales grew by 40.7% y/y to ₦78.87 billion from ₦56.07 billion in 9M 2023. On the other hand, export sales surged by 240.4% y/y to ₦10.66 billion, up from ₦3.13 billion in 9M 2023. The significant growth in export Revenue numbers is due both to the positive impact of the domestic currency depreciation in the period under review, and the increase in the global price of cocoa with consequent impact on the exports of cocoa butter and liquor in the intermediate cocoa product segment.

Cadbury’s annualized asset turnover improved to 1.65x in 9M 2024, up from 1.27x in FY 2023, indicating the company’s enhanced ability to efficiently utilize its asset base to generate higher Revenue during the period.

Source: Company Financials, CSL Research

Cadbury’s Cost of Sales surged by 74.3% y/y to ₦74.76bn in 9M 2024, up from ₦42.89bn in 9M 2023. We opine that the rise was in part driven by inflationary pressures which has led to increased costs for raw and packaging material purchases/transportation and higher expense on spare part purchases (including clearing costs). As a result, the cost-to-sales ratio jumped to 83.5% in 9M 2024, from 72.5% in the previous year. The company’s Gross Profit for 9M 2024 dropped by 9.5% y/y to ₦14.77bn, down from ₦16.31bn in 9M 2023 while Gross Profit Margin pared by 11.1 percentage points to 16.5%, compared to 27.5% in 9M 2023.

Total Operating Expenses for Cadbury increased to ₦7.40bn in 9M 2024, compared to ₦6.73bn in 9M 2023. The increase was primarily driven by a 44.7% y/y rise in Administrative Expenses to ₦2.22bn in 9M 2024 from ₦1.53bn in the corresponding period of the previous year while Selling and Distribution Expenses dipped slightly by 0.1% y/y to ₦5.187bn in 9M 2024 from ₦5.194bn in 9M 2023. Overall, OPEX margin for Cadbury in 9M 2024 settled at 8.3%, down from 11.4% in 9M 2023.

The company’s EBITDA for 9M 2024 came in at ₦7.71bn, a 29.1% decline from ₦10.87bn in the same period in 2023 while EBITDA margin for Cadbury in 9M 2024 compressed by 9.8 percentage points to 8.6%, down from 18.4% in 9M 2023. Furthermore, Operating Profit plunged by 35.3% y/y to ₦6.25bn in 9M 2024 compared to ₦9.65bn in 9M 2023. This decline was partly due to Other Expenses such as impairment provision on idle assets, loss on lease termination, and loss on disposal of property, plant and equipment, totaling ₦1.12bn in 9M 2024. This contrasts with the Other Income position of ₦67mn in 9M 2023. Depreciation and Amortization Expenses for Cadbury increased by 19.6% y/y to ₦1.46bn for 9M 2024 from ₦1.22bn in the same period of 2023, while the company’s EBIT margin for 9M 2024 stood at 7.0%, 9.3 percentage points lower than the 16.3% recorded in the same period last year.

Finance Income for Cadbury in 9M 2024 was ₦343.84m, significantly lower than ₦1.80bn in 9M 2023 driven by reduced call deposit volumes in the period. On the flip side, Finance Cost grew by 8.5% y/y to ₦23.53bn in 9M 2024, up from ₦21.69bn in 9M 2023. This increase was primarily due to 1) a notable increase in realized exchange differences which increased to ₦15.00bn in 9M 2024 from ₦191.72m in 9M 2023, and 2) the 409.6% y/y rise in interest expense to ₦4.13bn in 9M 2024 from ₦810.14m for 9M 2023 due to currency devaluation impact on increased intercompany loans. However, unrealized exchange differences for the company reduced significantly from ₦20.69bn in 9M 2023 to ₦3.86bn in 9M 2024. Consequently, Net Finance Cost for Cadbury rose by 16.6% y/y to ₦23.18bn in 9M 2024, up from ₦19.90bn in 9M 2023.

Overall, Cadbury’s Loss Before Tax increased by 65.4% y/y to ₦16.94bn in 9M 2024 compared to ₦10.24bn in 9M 2023. After accounting for an income tax credit of ₦5.08bn, Loss after Tax for Cadbury settled at ₦11.86bn, up 15.8% y/y from ₦10.24bn in 9M 2023.

Our estimates are currently under review. Current Price: ₦18.20/share.

Kindly click on the below link to download the full report.

​CADBURY 9M 2024 Quick Take.pdf​​​​​​​