Cadbury Nigeria Plc returned to profit in the first quarter, but the company is far from recovering from two years of huge losses.
After a N7.3 billion loss in the first quarter of last year, the beverages and confectioneries manufacturers resurfaced to a net profit of roughly N6 billion at the end of March 2025.
The interim financial report of the company for the first quarter ended March 2025 however shows that it is only starting a long recovery journey from two years of losses that consumed shareholders’ funds and dashed dividend hopes for years.
The profit for the first quarter merely dropped into the depth of accumulated losses of over N37 billion created by net losses of N22.4 billion in 2023 and N22.2 billion in 2024. That still leaves past losses as much as N31.3 billion ahead of Cadbury, requiring years of sustained profitability to level up before remembering shareholders for dividends.
Cadbury was faced with high operating volatility before it was hit by foreign exchange losses over the past two years. It suffered net foreign exchange losses of N37.5 billion in 2023 and over N28 billion in 2024, which created the losses that occurred during the two years.
The strength for the turnaround in the first quarter is mostly the absence of foreign exchange losses for the period. In the same quarter last year, net foreign exchange losses amounted to over N1 billion, but the reading has changed to net foreign exchange gains of N178 million this year.
The loss incurred in 2023 submerged the company’s shareholders’ funds of N12.7 billion in 2022 to negative N10.2 billion at the end of 2023. Management effected fresh equity injection through conversion of an inter-company loan into equity but further loss in 2024 swelled accumulated losses from N15 billion to over N37 billion and drained off much of the gains in equity capital.
Shareholders’ funds have upturned from N4.4 billion at the close of last year to N10.4 billion in the first quarter but a lot of hard work remains for the company to heal from overbearing retained losses.
Besides the dry up of exchange losses, there is a positive signal in cost-income rebalancing seen in the first quarter that raises hopes for the year. The company’s cost-income structure that kept it under pressure even before the exchange losses has shifted.
Production cost, which is the main culprit, has altered from revenue consuming to cost saving. Last year, input cost grew well ahead of sales and squeezed margins below the break-even mark.
The first quarter saw a reversed move in which growth in sales revenue overtook the increase in production cost to the regaining of margins. At N37.2 billion, turnover grew by 57 percent for Cadbury year-on-year against an increase of 34 percent in cost of sales to N25 billion.
The cost saving powered an outstanding growth of 143.4 percent in gross profit year-on-year to over N12 billion at the end of the first quarter. This is reinforced by a favourable reading of operating activities: a big upturn in other income, a drop in administrative expenses and a slowdown in selling/distribution cost.
With the second level cost saving, operating profit multiplied three and half times to N9.7 billion over the period, a big rebound from a drop at the end of last year.
A third level cost saving came from a major drop in net finance expenses following the absence of foreign exchange losses in the first quarter. Net finance expenses fell from N13.2 billion to N1.1 billion over the period.
That marked the turning point from a pre-tax loss of N10.5 billion for Cadbury in the same period last year to a pre-tax profit of N8.5 billion in the first quarter. At almost N6 billion, after tax profit also rebounded from a loss of N7.3 billion over the period.
The company closed the first quarter operations with earnings per share of N2.62, a turnaround from loss per share of N3.21 in the first quarter of last year.
(Inside Business Online)
