Cadbury Nigeria Plc has announced a 50 percent profit drop in half year 2014, as top-line performance dwindled.
For the first six months of the year, the company’s revenue fell by 12 percent to N15.25 billion from N17.43 billion in the same period of the corresponding year (HY) 2013.
The bottom-line level didn’t improve as profit before tax (PBT) reduced by a double digit figure of 50 percent to N1.79 billion in HY 2014, as against N3.58 billion as of HY 2013.
Although the company witnessed a 50 percent reduction in tax liability, profit after tax (PAT) in the review period still slid by 50 percent to N1.26 billion from N2.51 billion as of HY 2013.
Some analysts had envisaged lower half year performance for firms in the FMCG space as a result of the insurgency in the North, which they say have been hampering distribution network of firms in the sector, thus crimping growth potentials.
Other impediments include bad roads, which culminate in high distribution costs for firms like Cadbury, and also erratic power supply from the grid that results in companies using expensive alternate source of power, such as diesel for production.
Competition from rivals such as Nestle, a company that has been growing amid economic uncertainties, could slow the top-line performance of Cadbury.
As a result of the aforementioned, input costs were high as cost-of-sales margin jumped to 62 percent in 2014, from 60 percent in 2013.
Net margin, a measure of efficiency and profitability, shrank to 8.22 percent in HY 2014, compared with 14.41 percent as of HY 2013.
Despite the volatile operating environment, Nigeria’s growing population and its middle-class provide innumerable opportunities for Cadbury to tap into and increase its share of the market.
According to a recent report by McKinsey, it is projected that consumption could more than triple, rising from $388 billion/year to $1.4 trillion/year in 2030, an annual increase of about 8 percent.
Cadbury plans to invest as much as $30 million (N4.7bn) in processing facilities for cocoa, the major raw material used in the production of one of its market penetrating brand – Bournvita. This it said will magnify the return on shareholders’ investment.
Current ratio, which measure the ability of a firm to meet short-term obligation as at when due, decreased to 0.88x in 2014, as against 1.82x in 2014 – the figures are below the 2.1x industry average.
Total assets were down by 31.71 percent to N29.48 billion in HY 2014, compared with N43.17 billion as of HY 2013.
The company’s share price closed at N74.25 on July 28, 2014, on the floor of the Nigerian Stock Exchange, while market capitalisation was N139.45 billion.
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