Businesses in the largest economy in Africa have experienced quarterly declines in margins and pressure on profitability as global inflation has emerged as the theme of 2022.
Nigeria’s inflation rate first hit its 17-year record high of 19.64 percent in July and climbed to 21.47 percent in November 2022, impacting the cost of raw materials used by firms in production.
As a result, despite revenue reaching a 10-year high and profit expanding by 110.7 percent annually, Cadbury Nigeria’s profitability was severely pressured, with its profit margin reaching 1.71 percent in 2022, 65 basis points higher than 1.06 percent in 2021.
Further findings BusinessDay reveals that on a quarterly basis, the consumer goods firm’s profit margin slowly declined from 12.04 percent in the first quarter (Q1) of 2022 to -14.76 percent in the fourth quarter (Q4) of 2022.
The firm’s revenue grew by 30 percent in the 12-month period of 2022 to N55.21 billion from N42.37 billion in the corresponding period of 2021, while its profit surged to N946 million in 2022 from N449.7 million in 2021.
The cost of sales reported by Cadbury Nigeria Plc in 2022 claimed 85.94 percent of the firm’s total revenue reported during the period. Its cost of sales grew by 40 percent to N47.45 billion in 2022 from N33.89 billion in 2021.
Operating expenses grew by 26 percent to N7.59 billion in 2022 from N6.01 billion in 2021 on the back of a 31 percent and 25.5 percent increase in administrative and selling and distribution expenses respectively.
However, Cadbury Nigeria managed to take advantage of the central bank of Nigeria’s hawkish stance by growing its net finance income by 81.52 percent to N1.10 billion in 2022 from N606 million in 2021.
Total assets grew by 37 percent to N59.71 billion in 2022 from N43.69 billion in 2021, while shareholder equity grew slowly by 0.07 percent to N13.64 billion in 2022 from N13.63 billion in the corresponding year.
The firm’s cash position appears robust as it grew its total cash and cash equivalents by 54 percent to N27.45 billion in 2022 from N17.82 billion in 2021.
Below is Cadbury’s financial performance in 2022 on a quarterly basis.
First Quarter (Q1) – Finance income drove profit
In the first three months of 2022, Cadbury reported a 539 percent rise in its profit after tax deductions to N1.54 billion from N242 million in 2021.
The surge in profit was on the back of an 1113 percent increase in net finance income which grew to N279 million in the first quarter of 2022 from N23 million in the first quarter of 2021.
Furthermore, it reported revenue of N12.79 billion in the first quarter of 2022, 43.39 percent up from N8.92 billion in the same period of 2021.
Cost of sales claimed 74.75 percent of the FMCG’s total revenue during the period and grew by 28.67 percent in the first quarter of 2022 to N9.56 billion from N7.43 billion in the first quarter of 2021.
Consequently, the profit margin rose by 934 basis points to 12.04 percent in Q1’2022 from 2.70 percent in Q1’2021, indicating an increase in profitability during the period.
Operating expenses during the period grew by 13.68 percent to N1.33 billion in the first quarter of 2022 from N1.17 billion in the corresponding period of 2021.
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Second Quarter (Q2) – Finance income, lower OPEX drove profit
Year on year, profit after tax deductions reported by Cadbury Nigeria Plc in the second quarter of 2022 rose to N800 million from a loss of N861 million in the second quarter of 2021.
However, on a quarterly basis (q/q), the profit reported in Q2’2022 was a 48.05 percent decline from the N1.54 billion reported in Q1’2022.
Total revenue increased by 57 percent to N15.09 billion in the second quarter of 2022 from N9.60 billion in 2021. BusinessDay also notes that on a q/q basis, the revenue increased by 18 percent to N15.09 billion in Q2’2022 from N12.79 billion recorded in Q1’2022.
On a quarterly basis, the refreshment beverages category was also up 21 percent to N10.99 billion in Q2’2022 from N9.08 billion in Q1’2022. Also, sales of TomTom, Butter mint, and other confectioneries were up q/q by 10.5 percent to N3.78 billion in Q2’2022 from N3.42 billion in Q1’2022.
Revenue from intermediate cocoa products was up 10.7 percent q/q to N322 million in Q2’2022 from N291 million in Q1’2022.
Cost of sales claimed 82.64 percent of its total revenue during the period and grew by 39.96 percent to N12.47 billion in Q2’2022 from N8.91 billion in Q2’2021. In Q2’2022 the cost of sales also increased by 30 percent q/q from Q1’2022.
Consequently, the profit margin improved to 5.30 percent in the second quarter of 2022 from -8.97 in the corresponding period of 2021. On a quarterly basis, the profit margin was down by 674 basis points in the second quarter of 2022.
Operating expenses marginally by 4.29 percent to N1.7 billion in Q2’2022 from N1.63 billion in Q1’2022.
Net finance income also grew by 207 percent to N218 million in the second quarter of 2022 from N71 million in the corresponding period of 2021 on the back of rising interest rates.
Third Quarter (Q3) – Higher OPEX, rising input cost cause profit decline
In the third quarter of 2022, Cadbury Nigeria Plc reported a 76.60 percent decline in profit to N475 million from N2.03 billion in the same period of 2021. In the same vein, profit was down by 40.63 percent in Q3’2022 from Q2’2022.
The decline was on the back of a 74.38 percent increase in operating expenses and a 50.25 percent rise in the cost of sales. Operating expenses grew to N2.11 billion in Q3’2022 from N1.21 billion in Q3’2021.
Similarly, the cost of sales grew to N12.14 billion in Q3’2022 from N8.08 billion in Q3’2021, claiming 82.81 percent of total revenue in the period. Total revenue reported by Cadbury Nigeria in Q3’2022 amounted to N14.66 billion, 27.26 percent up from N11.52 billion in Q3’2021. On a quarterly basis, revenue was down by 2.85 percent in Q3’2022 from Q2’2022.
Thus, the profit margin for the period amounted to 3.24 percent, 1438 basis points lower than 17.62 percent in Q3’2021.
Net finance income declined by 10.04 percent in the third quarter of 2022 to N215 million from N239 million in the same period of 2021.
Fourth Quarter (Q4) – Input cost claims 105 percent of revenue
Cadbury Nigeria’s revenue in the fourth quarter of 2022 amounted to N12.67 billion, 2.84 percent higher than N12.32 billion in the fourth quarter of 2021. On a quarterly basis, the figure was 13.57 percent lower than the total revenue generated in Q3’2022.
The consumer goods company also reported a loss totaling N1.87 billion in Q4’2022 from N-684 million in Q4’2021. The loss reported was a result of the cost of sales claiming 104.81 percent of the firm’s total revenue during the period.
The cost of sales was up by 16.08 percent in Q4’2022 to N13.28 billion from N11.44 billion in Q4’2021.
Consequently, Cadbury Nigeria Plc reported a loss margin of 14.76 percent in the fourth quarter of 2022.
Operating expenses also grew by 15.49 percent to N2.46 billion in Q4’2022 from N2.13 billion in Q4’2021.
The firm’s net finance income was up 43.07 percent to N392 million in Q4’2022 from N274 million in Q4’2021.
