November 28, (THEWILL) – Investors in Cadbury Nigeria Plc will continue to think back to the days when the company’s annual performances were written in figures that evoked joy and satisfaction. That was the previous five years (2011-2015). A lot of things have changed since then. Between 2016 and 2020, the company’s fortunes nosedived, hovering around lower digits, an indication that it was bound to face hard times, as the tough operating environment lingered. While the third quarter (Q3) 2021 interim report of the company shows some improvement in its fundamentals, analysts say another full year is needed, after 2021, to confirm its return to the “good old days”.
After it experienced some challenges, including scandalous administrative practices that earned it very low scores in corporate leadership, the beverage and confectionery giant seems to have picked up its broken pieces and managed to bounce back. This earned it the admiration of market watchers amid mixed fortunes of the Fast-Moving Consumer Goods (FMCG) firms. Between 2011 and 2015, Cadbury recorded impressive results in its fundamentals before slipping into its first loss (in 2016) during the 10-year period.
During the five-year period, profit after tax (PAT) dropped slightly from N3.67 billion in 2011 to N3.45 billion in 2012 or 6 percent, before jumping to its peak of N6.6 billion in 2013 or 91.3 percent. Thereafter, it dropped by 67.72 percent to N2.13 billion before crumbling to N1.15 billion or 46 percent in 2015. The season of lean times set in from 2016 with a loss of N296.4 million, which kick-started the last five years of low returns (2016-2020), prompting investors to look back to the “good old days” of the firm and share their joyful experience in the past tense.
From a loss of N296.40 million in 2016, the firm recorded a PAT of N300 million and N823 million in 2017 and 2018 respectively, representing 174.4 percent. Then it hit N1.07 billion in 2019 before it dropped to N931.82 million in 2020.
In case of return on investment, the multinational FMCG paid a dividend of 50 kobo in 2012 after seven years of dividend drought. The dividend trajectory continued on an uneven surface. It rose progressively to 130 kobo for each of 2013 and 2014 financial years, before recording a huge drop to 65 kobo in 2015 and 2016 or 50 percent. No dividend was paid in 2017. Between 2018 and 2020, the company paid dividends of 16 kobo, 49 kobo and 18 kobo for each of the three years respectively.
Earnings per share dropped from 117 kobo in 2011 to 50 kobo in 2020 as shareholders’ fund also dipped from N33.65 billion in 2011 to N13.54 billion in 2020.
The third quarter (Q3) 2021 unaudited interim report submitted to the Nigeria Exchange shows improved performance that could restore the 56-year-old multinational to the trajectory of better performance, even momentarily; but the impact of the low performance period could be deep. Revenue grew to N30 billion compared to N25.8 billion in Q3 2020 representing 16.28 percent. PAT rose by 75.65 percent to N1.5 billion from 854.38 million in the corresponding period of 2020.
Total assets hit 42.27 billion in Q3 2021 as against N33.21 billion in Q3 2020 or 27.29 percent as the company struggled to beat down Cost of Sale, Marketing and Selling, Distribution and Administrative expenses in a high inflationary regime. Cost of Sale for Q3 2021 dropped to N24.42 billion from N30.51 billion in the corresponding period of Q3 2020 when businesses battled with COVID-19 restrictions and land border closure.
Stakeholders and industry experts believe that Cadbury can maintain the tempo of good performance, given the figures in the Q3 report. The beverage producing firm reported a 14.4 percent slump in export sales revenue to N3.3 billion in nine months in 2020 due to the pandemic and closure of the land border.
“We presume that Cadbury Nigeria Plc is coming out of the woods gradually. If the trend can continue for the fourth quarter of 2021 and first and second quarters of 2022, it might improve their share price also. But the management should endeavor to control cost which will be additional advantage”, said the National Co-ordinator, Pragmatic Shareholders Association of Nigeria, Mrs Bisi Bakare.
The doyen of stockbroking and Director at UIDC Securities Limited, Mr Sam Ndata, described the latest result as an indication that Cadbury is getting back to good old days of good performances. He recalled that the ugly era of poor corporate governance practices and good leadership deficiency caused the firm a huge setback.
Ndata told THEWILL in a note that after having some problems during the tenure of a particular chief executive of the company, Cadbury had never been the same.
He noted that the beverage producing company has not recovered from the events of that period. “But with the consistency of good management in place, I can consider the latest signs as one of getting back to the good old days of good performance, ” he said.
A stockbroker and Head of Securities Trading at Planet Capital, Mr Paul Uzum, said that Cadbury is taking advantage of the high inflation rate that has given the FMCG firms the window of selling at much higher prices. He sees better days ahead for the beverage and confectionery giant, based on its Q3 2021 report.
“Many consumer goods firms seem to be doing better now because the high inflation rate has given them the opportunity to sell at much higher prices. For Cadbury specifically, PAT for nine months almost doubled from N855 million to N1.5 billion, which is remarkable. This is a good sign that the worst is over,” Uzum said in a note to THEWILL.
The Corporate Communications and Government Affairs Department of Cadbury Nigeria Plc, did not respond to a request for comment.
However, a former senior member of staff, who spoke on the condition of anonymity, told this newspaper that it was too early to conclude that the good old days had returned at Cadbury. “A good performance report of one year is not enough to conclude that the time of ruminating about the good old days is over. We need to watch the trend for the next two or three years because of human, environmental, government and other intervening factors.”
About the Author
Sam Diala is a Bloomberg Certified Financial Journalist with over a decade of experience in reporting Business and Economy. He is Business Editor at THEWILL Newspaper, and believes that work, not wishes, creates wealth.
