Cadbury Nigeria Plc Grew OPEX by 18% YoY in Q3 2017 Results


Event: Cadbury Nigeria (Cadbury) reports Q3 2017 results

Implications: Upward revision to consensus estimates likely

Positives: PBT and PAT of N702m versus losses in Q3 2016

Negatives: Opex grew by 18% y/y
Earlier this afternoon, Cadbury Nigeria (Cadbury) reported its Q3 2017 results. Sales of N8.1bn were up by 9.3% y/y. Recording a zero tax expense, Q3 PBT and PAT of N702m compare with pre-tax and post-tax losses of –N1.1bn and –N989m recorded in Q3 2016 respectively. In addition to the sales growth, the company recorded a gross margin expansion of 2,428bps y/y to 30% and a -98% y/y decline in net finance costs.

These positives more than offset an 18% y/y rise in operating expenses, leading to the pre-tax profit vs the loss recorded in the corresponding quarter of last year. Sequentially, sales were flattish q/q. Gross margin expanded by 1,267bps q/q and operating expenses declined by -17% q/q. These positives led to the profits recorded versus the losses of –N862m (pre tax) and –N859m (post tax) recorded in Q2 2017 respectively.

On a 9M basis, sales grew by 14% y/y to N24.4bn. 9M pre-tax and post-tax losses narrowed by -92% y/y to –N64bn. Although net finance charges grew to –N206m (versus net finance income of N185m in 9M 2016), this was not strong enough to offset the strong sales growth and a 206bp y/y gross margin expansion to 23%, and led to the stronger bottom line. The company reported zero tax expense.

Compared with our estimates, Q3 sales were in line. PBT and PAT surprised positively. We had forecast a pre-tax loss of –N251m. On an annualised basis, 9M sales are tracking behind consensus’ FY estimate by 8% but the company is likely to meet consensus’ FY 2017 PBT and PAT estimates of N450m and 314m respectively.

Cadbury shares have gained +3.5% ytd but have underperformed the NSE ASI by -32.4%. On the back of these results, we expect a positive reaction by the market.

We rate the stock Neutral. Our estimates are under review.

Cadbury Nigeria Q3 2017 results vs. FBNQuest Research estimates (N millions)


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Godwin Okafor is a Financial Journalist, Internet Social Entrepreneur and Founder of Naija247news Media Limited. He has over 16 years experience in financial journalism. His experience cuts across traditional and digital media. He started his journalism career at Business Day, Nigeria and founded Naija247news Media in 2010. Godwin holds a Bachelors degree in Industrial Relations and Personnel Management from the Lagos State University, Ojo, Lagos. He is an alumni of Lagos Business School and a Fellow of the University of Pennsylvania (Wharton Seminar for Business Journalists). Over the years, he has won a number of journalism awards. Godwin is the chairman of Emmerich Resources Limited, the publisher of Naija247news.


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