August 03, (THEWILL) — Cadbury Nigeria’s 2025 financial performance was undoubtedly impressive. Revenue rose about 31 percent to N169.84 billion, gross profit doubled, operating profit surged by over 240 percent, while the company moved from a N22.2 billion loss in 2024 to a N12.1 billion profit in 2025. Shareholders’ funds also improved significantly.
However, beneath those impressive numbers are several risks that might interest investors: while the income statement highlights the success story, the balance sheet tells the sustainability story.
Also, deeper reading of the notes to Cadbury Nigeria Plc’s 2025 audited financial statements shows that the remarkable return to profitability masks several structural risks relating to liquidity, concentration risk, foreign exchange exposure and sustainability of earnings.
Earnings on tightrope
Earnings are highly exposed to exchange rate movements, and this remains Cadbury’s biggest structural risk. Although the naira was relatively more stable during much of 2025 than during the massive devaluation of 2024, Cadbury still depends heavily on imported raw materials, packaging materials and industrial inputs.
The notes show that foreign currency remains one of Cadbury’s biggest financial risks because many raw materials are imported. Although FX losses reduced significantly compared with 2024, another sharp naira depreciation could quickly erode profitability.
If another major naira depreciation occurs, production costs could rise sharply, finance costs may increase and margins could shrink rapidly. In other words, the 2025 profit recovery is partly built on a calmer foreign exchange environment rather than a permanent improvement in business fundamentals. This could trigger the question: “Has Cadbury truly recovered, or has the naira simply stopped hurting it?”
Negative working capital
Current liabilities still exceed current assets by a wide margin.
The biggest warning sign is that Cadbury remains in a negative working capital position.
Current Assets: N46.11 billion.
Current Liabilities: N64.82 billion.
Working Capital Deficit: N18.71 billion.
Although liabilities reduced from 2024, the deficit remains enormous. This means the company still depends on: rapid inventory turnover, continuous bank financing, supplier credit, uninterrupted cash collections.
Any disruption in sales, foreign exchange, or consumer demand could quickly create liquidity pressure.
Lean equity position
Although shareholders’ funds jumped to N16.47 billion from N4.38 billion, liabilities still stand at an uncomfortable position.
Total liabilities: N65.68 billion
Equity: N16.47 billion
Liabilities are almost four times shareholders’ funds. That means creditors—not shareholders—continue to finance most of the business. This exposes Cadbury to: refinancing risk, higher financing costs, pressure from lenders if earnings weaken.
Retained losses
Huge retained losses still weigh on the balance sheet. The company still carries Retained losses at N25.21 billion. Although 2025 profit reduced accumulated losses substantially, one profitable year has not erased years of destruction of shareholder value. Implications: dividend capacity remains constrained; future profits may continue to repair the balance sheet rather than reward shareholders; another weak year could reverse much of the recovery.
Trade receivables, payable position
Trade receivables grew faster than cash. The report showed that Trade receivables increased to: N13.07 billion from N8.26 billion
That is an increase of almost 58 percent. Revenue increased strongly, but receivables expanded almost as fast.
Questions investors should ask include: Are customers taking longer to pay? Is Cadbury extending more generous credit?
Could future impairment losses rise? Fast-growing receivables often hide future cash flow problems.
Similarly, Trade and other payables remain extremely high: N36.98 billion. This is almost twice annual equity; more than twice cash balance. Heavy dependence on supplier financing may indicate: stretched payment cycles, dependence on supplier goodwill, vulnerability if suppliers tighten credit terms.
Cash balance, profitability position
Cash balance actually declined. Despite earning over N12 billion profit, Cash fell from N16.34 billion to N15.02 billion. Normally, a strong profit should translate into stronger cash. Instead, cash reduced, suggesting working capital absorption, debt servicing, tax payments, and inventory build-up. For analysts, this raises a classic question: How much of the reported profit became real cash?
Balance sheet recovery depends heavily on sustaining current profitability. The 2025 balance sheet reflects one excellent year.
However, the recovery is not yet fully entrenched because: accumulated losses remain high; leverage remains elevated; liquidity remains tight; working capital is still negative.
A single disappointing year could materially weaken the balance sheet again.
Huge deferred tax
Deferred tax asset remains very large: N16.27 billion. This is one of the largest single assets on the balance sheet. Deferred tax assets only retain value if future taxable profits remain sufficiently strong. If profits weaken over coming years, Cadbury may eventually have to impair part of this asset, reducing future earnings.
The key question is whether the company will generate enough future taxable profit to utilise those tax benefits. Future tax obligations could weigh on future earnings and cash flows. Given prevailing macroeconomic realities and operating uncertainties, this deserves a closer attention by investors.
Margin expansion constraints
While gross profit more than doubled, looking excellent, investors should, however, ask: Can this level be maintained? Reasons for caution include factors like volatile energy costs as diesel prices could rise again, the Federal Government has indicated that electricity “subsidy” would be removed from 2027. That will impact operations – directly or remotely. Transportation costs remain elevated, sugar prices remain unstable and cocoa prices are among the highest globally. If revenue growth slows while costs rise again, margins may contract. Therefore, “the extraordinary jump recorded in 2025 could represent a peak rather than a new normal,” said Mike Akannor, a finance analyst.
Cadbury’s brands depend heavily on household spending and Nigerian consumers remain under severe purchasing pressure. The citizens and residents battle weak real incomes, high food inflation, elevated unemployment and reduced disposable income.
Consequently, consumers may increasingly buy smaller sachets, trade down to cheaper brands and reduce discretionary purchases. The revenue growth may therefore become harder to sustain.
The challenge now is whether Nigerian consumers—already under pressure from inflation—can continue absorbing further price increases. Future growth may therefore depend more on efficiency than pricing.
Borrowing, assets position
Borrowings remain substantial despite reduction during the period. Borrowings declined from: N32.81 billion to N22.81 billion. While this is encouraging, N22.8 billion remains a significant debt burden for a consumer goods company operating in a high interest rates regime, volatile exchange rates environment and weak consumer purchasing power.
Any increase in financing costs could erode future profits.
Also, Asset growth was funded more by liabilities than fresh equity. Total assets rose to N82.14 billion, but equity increased mainly because of retained profit rather than new capital injection. This means the company still has relatively limited equity cushion should another economic shock occur.
Macroeconomic uncertainty
Macroeconomic uncertainty which defines the operating environment remains outside management’s control. Cadbury’s management can control manufacturing, product quality, distribution and marketing. However, it cannot control: inflation, exchange rates, interest rates, taxation, energy prices, insecurity and logistics disruptions.
The company’s risk management framework explicitly identifies exposure to market, liquidity, credit and interest-rate risks, underscoring that many of the factors affecting performance remain external.
A deterioration in Nigeria’s macroeconomic environment could quickly reverse some of the gains achieved in 2025. Balance sheet recovery depends heavily on sustaining current profitability. The 2025 balance sheet reflects one excellent year.
However, the recovery is not yet fully entrenched because: accumulated losses remain high; leverage remains elevated; liquidity remains tight; working capital is still negative. A single disappointing year could materially weaken the balance sheet again.
Epilogue
The biggest lesson from Cadbury Nigeria’s 2025 accounts is that the company has demonstrated impressive resilience by returning to profitability after a difficult 2024. Yet the turnaround should not be mistaken for complete insulation from structural risks.
Its dependence on imported inputs, exposure to exchange-rate movements, pressure on consumer spending, intense competition and vulnerability to macroeconomic shocks mean that the recovery is still fragile.
For investors, the key question is no longer whether Cadbury has staged a comeback, but whether it can transform a one-year rebound into a durable multi-year growth story.
If the operating environment remains supportive and management continues to execute effectively, the 2025 performance could mark the start of a sustained recovery. If not, some of the gains may prove temporary.
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.
