Home Analysis Cadbury Nigeria Shrinks Amid 81% Drop in Equity Capital

Cadbury Nigeria Shrinks Amid 81% Drop in Equity Capital

Cadbury Nigeria Shrinks Amid 81% Drop in Equity Capital

Cadbury Nigeria Plc got a valuation haircut after it lost about 9% due to selloffs. Unimpressed investors dumped the company shares after a steep earnings loss in nine months of the financial year 2023. According to the company’s unaudited result for nine months of the financial year 2023, total equity shrunk by 81% after it posted more than N20 billion unrealised foreign exchange loss.

The consumer goods producer is confronted with challenges from sizeable foreign currency-denominated liabilities and pressures from Nigeria’s operation amidst rivalry with competitors.  On Friday, the stock market value of the consumer goods company shrunk to N27 billion as investors continued to react negatively to more than N10 billion loss recorded in the third quarter of the year.

The company reported that its total equity nosedived by 81% year on year to N2.87 billion from N15.51 billion in the comparable period in 2022. This dragged net asset per share to N153 from N826, its unaudited financial statement showed. Due to macroeconomic pressure, competition has intensified in the consumer goods market as producers continue to compete for customers’ wallets.

While Cadbury Nigeria Plc has no problem generating revenue, it faces challenges in generating adequate profit that covers its costs from sales. In its 9-month result Cadbury Nigeria Plc. reported a 39.2% year-on-year growth in topline. Its revenue inched to N59.2 billion at the end of 9 months of 2023 from N42.54 billion in the comparable period in 2022.

A breakdown of its revenue-generating segment revealed that Refreshment Beverage sales grew by about 107% year on year to N41.08 billion. Its Confectionary segment recorded a surge of 54.6% year on year in sales to N13.88 billion and Intermediate Cocoa Products grew by 169.7% to N3.02 billion respectively. Its new product line, biscuits recorded N1.04 billion in revenue.

Its financial scorecard showed that gross profit actually expanded by about 95% over the 12 months, reaching N16.307 billion from N8.3 billion in 9M-2022. Key issues facing the company emanated from operational challenges as foreign exchange losses drove net finance costs upward, steeply more than what growth in top-line performance could curtail.

Turned negative by the devaluation of the naira, net finance costs increased strongly to N19.891 billion in 12 months from N712 million the company reported as net finance income a year earlier. In the period, interest income from bank deposits rose to about N1.8 billion, reducing the negative effect of losses sustained from FX movement – albeit- very moderately. 

Specifically, the consumer goods company recorded an unrealised FX loss of N20.868 billion while its realised loss from currency movement was about N192 million. At the end of the period, Cadbury Nigeria Plc recorded more than N10.2 billion loss sustained despite nil tax payment from N2.8 billion profit posted in the comparable period in 2022.

Cadbury Nigeria is a subsidiary of Mondelēz International incorporated, in the US, Mondelēz International, through Cadbury Schweppes Overseas Limited held 74.97% of the issued and fully paid share capital of the Company. #Cadbury Nigeria Market Value Shrinks Amid 81% Drop in Equity Capital Naira Devaluation Deepens Economic Crisis in Nigeria