Cadbury Nigeria Plc has rebounded from a loss position in the second quarter to build profit in the third. This has rekindled hopes for sustaining profit recovery and growth for the fourth straight year.
The beverage and confectionaries manufacturing company overcame its major challenge of loss of sales in the second quarter and was able to push up sales revenue quarter-on-quarter. Against a drop of over 27 per cent in turnover quarter-on-quarter at half-year, it improved sales by 4.4 per cent to N9.9 billion for the third quarter.
The strength in sales gained in the third quarter was still insufficient to prevent a drop in a turnover on a year-on-year basis. The margin of the drop in sales has however declined from 18 per cent at half-year to less than 11 per cent at the end of the third quarter.
The company’s management intensified cost controls in the third quarter, which enabled it to build a profit of N420 million for the quarter – a turnaround from losses of N102 million in the second quarter and N77 million in the same period in 2019. Cost savings happened all through the expense lines in the third quarter, leading to an improvement in margins.
The company is reaping the rewards of timely deleveraging of the balance sheet. The strength from debt-free balance sheet was maintained in the third quarter with a further gain in net finance income.
The company ended the third quarter operations with a net finance income of over N85 million, though sustaining the drop year-on-year. The absence of finance expenses is a key factor that has prevented wider volatility of profit performance so far this year.
Cadbury Nigeria closed the third quarter operations in September 2020 with sales revenue of N25.8 billion, which is a year-on-year drop of 10 per cent. Both domestic and export sales went down at the end of the third quarter, reversing the strong growth of 25 per cent in export revenue at half-year.
Cost of sales dropped slightly ahead of sales at 11 per cent to N20.5 billion, which afforded a moderate cost saving. That tempered the downward pressure on gross profit – cutting the margin of the drop from 20 per cent at half-year to less than 10 per cent year-on-year to N5.3 billion at the end of the third quarter.
Further cost savings were made from selling/distribution and administrative expenses at the end of the third quarter. The cost lines went down by 13 per cent to N3.3 billion and 29 per cent to N936 million respectively at the end of September 2020.
The cost savings made a big difference in the company’s earnings performance during the review period. They resulted in a sudden change of position from close to 20 per cent drop in operating profit at half year to almost 40 per cent leap to N1.1 billion at the end of the third quarter.
Cadbury Nigeria ended the third quarter operations in September 2020 with an after-tax profit of over N854 million. This turned a profit drop of 20 per cent at half-year into a year-on-year growth of almost 32 per cent.
The profit of N420 million in the third quarter provided the strength to wipe off a loss of N102 million sustained in the second quarter and top up the closing figure for the nine months of the financial year.
The company closed the 2019 operations with an after-tax profit of over N1 billion, which is a sustained profit recovery for the third year running since returning to profit in 2017. A further gain in momentum in the final quarter may see the company maintain the profit improving trend for the fourth consecutive year in 2020.
The company earned 45 kobo per share at the end of the third quarter, an improvement from 35 kobo per share in the same period last year. It earned 57 kobo per share at the end of 2019 and gave out 49 kobo per share to shareholders in cash dividend.
The full-year outlook is promising to see a further gain of momentum in sales in the final quarter. Costs are expected to remain under check, which could boost profit margin further.
[…] revenue improvement in 2019 was the first time that Cadbury Nigeria would beat its sales revenue figure of N36 billion attained as far back as 2013. The strength for a […]