Cadbury Nigeria’s full year in 2022 shows a growth trajectory that would impress the shareholders who have waited long for a return to the good old days. After a stint at the low rungs of corporate stairs, the beverage and confectionery giant appears to have resumed flight at the altitude it was known for in the days of yore.
The company’s FY 2022 financial statements filed with the Nigerian Exchange show improved parameters in topline and bottomline at a time earnings are challenged by raging inflation, high interest and exchange rates and drop in consumer demand.
Cadbury’s revenue haul rose by 30.4 percent to N55,2 billion from N42,3 billion. This came from high liquidity that earned the company significant revenue of N1.6 billion in finance income accruing from interest on bank deposits. This represents an 87.9 percent increase from N856 million in the preceding period.
The overall impact showed in net finance income of N1,1 billion against N606 million earned in the previous year which was an 82.2 percent jump – suggesting high efficiency in cost management which contributed to the significant growth achieved during the year.
Unlike in the previous year when the company recorded N249 million as finance cost, the figure for 2022 showed a 102 percent increase to N503 million on the back of the increase in interest rates announced by the Central Bank of Nigeria (CBN).
We had noted in our previous report that in the previous five years of 2016 – 2020, the company’s fortunes nosedived, hovering around lower digits that indicate a stint in hard times, as the tough operating environment lingered
We had also noted last year that Cadbury was transiting to the league of high flying firms after the travail in scandalous corporate governance that trailed it for some time. Interestingly, the improvement in profit before tax to N1,2 billion from N1 billion in the FY 2022 report cascades to a 30 percent growth recorded in profit after tax to N583 from N449 million in the previous year.
In an environment of high inflation, the company’s profit was under pressure from high cost of sales which spiraled 32.4 percent to 47.4 billion from N35.8 billion in the preceding period.
Cost of sales, selling and distribution expenses, administrative expenses recorded a combined N55.1 billion compared to N41.9 billion representing a 31.5 percent increase. Further analysis of the document showed that raw and packaging materials and personnel expenses constituted the key cost elements.
Like its peers in the fast-moving consumer goods sector, Cadbury suffered N2 billion from foreign currency exchange loss as against N542 million in the previous year on the back of forx market volatility and depreciation of the Naira.
Also, the company’s strong balance sheet, driven by huge liquidity on the back of healthy trade and other receivables grew by 38 percent to hit N60 billion from N43.6 billion in 2021.
Consumer goods firms have been under the pressure of multiple taxes which the Manufacturers Association of Nigeria (MAN) recently lamented over. Their protest led to the delay in signing the 2023 Finance Bill by President Muhammadu Buhari because of high and multiple tax elements.
“Manufacturing companies are being overtaxed by the government. More worrying is that their output is what is being taxed and that will lead to serious consequences. When you tax output – finished goods – it has far-reaching implications,” said Dr Muda Yusuf, Director/CEO, Centre for the Promotion of Private Enterprises (CPPE), on a national television programme Friday, monitored by THEWILL. Cadbury’s income tax expenses was N715,299, compared to N648,205 in the previous period. All these contributed to thinning down the earnings.
High operating cost impacts on manufacturing companies’ capacity to create jobs, especially through the backward integration programme, which focuses on local sourcing of raw materials. Cadbury has a cocoa processing facility in Ondo state under the programme which has helped in job creation and boosting the GDP.
Stakeholders had applauded the recovery of Cadbury following its moderate performance last year.
“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 also improve their share price. But the management should endeavor to control cost which will be an additional advantage”, National Co-ordinator, Pragmatic Shareholders Association of Nigeria, Mrs Bisi Bakare, had said.
The doyen of the stockbrokers and Non-Executive Director at UIDC Securities Limited, Mr Sam Ndata, said the good results were an indication of getting back to the good old days of good performance by the firm. He recalled in a note to THEWILL then that the ugly era of poor corporate governance practices and deficient leadership was a huge setback for the company.
A stockbroker and Head of Securities Trading at Planet Capital, Dr Paul Uzum, said Cadbury was taking advantage of the high inflation rate that the consumer goods firms enjoyed.
The financial statement showed a proposed total dividend of N157,218 as against N57,632 in the previous year which will excite the shareholders who have waited long for the return of the good old days of the Bournvita producing firm.
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.
