Cadbury Nigeria Plc posted a pre-tax loss of N13.880 billion for the first half of 2024, showing a 4.5% improvement over the same period in 2023. In Q2 2024, the company reported a loss of N3.423 billion, significantly better than the N10.457 billion loss in Q1.
The company’s total assets grew by 6.35% to N67.456 billion. Cadbury might exit its 2023 loss, which was N28.157 billion, if it continues this positive trend.
Key factors influencing this potential recovery include sustained revenue growth, effective cost management, hedging against foreign exchange losses, and favorable market conditions. Revenue increased by 46% year-on-year (YoY) in Q2 to N27.745 billion, driven mainly by domestic sales, which accounted for over 88% of total revenue. Half-year revenue reached N51.440 billion, reflecting a 45% YoY growth.
Despite the revenue growth, high costs of sales have impacted profitability. The cost of sales in Q2 was N23.150 billion, a 95% YoY increase, pushing the half-year cost to N41.853 billion. This contributed to a decline in gross profit, which fell by 6.28% YoY to N9.587 billion, with the gross profit margin dropping by 350 basis points to 19% in H1 2024.
Foreign exchange losses also significantly affected the company. Cadbury reported N36 billion in forex losses in 2023, with N13.4 billion realized in Q1 2024, leading to a half-year forex loss of N15.76 billion.
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However, the reduction in forex losses in Q2 compared to Q1 and 2023 is a positive sign. If this trend continues, it could stabilize Cadbury’s financial performance in the remaining quarters of 2024, potentially boosting investor confidence and stock prices.
Cadbury’s stock has been bearish this year, with a year-to-date (YtD) loss of 2.63%, contrasting the 2023 YtD gain of 59.66%. Despite current unprofitability, the company enjoys a high valuation, reflected in its price-to-book (P/B) ratio of 7.46x, indicating strong market expectations.