CADBURY Nigeria PLC just published September 30 2018 result with net profit of NGN600 million in Q3. This overturned the loss of NGN420 million in H1-2018 to NGN170 million profit in 9M 2018 (9M-2017: NGN60 million loss). The NGN680 million pre-tax profit in Q3 beat the NGN560 million we estimated, and is the company’s highest since Q3-2017.
According to a team of analysts from Cordros Capital Nigeria, revenue performance was a positive surprise. Growth was 16% y/y and 1% q/q in Q3, which beat their estimate by 5%. Compared to Q2-18, domestic sales grew marginally while exports declined. Compared to last year (LY) however, export growth was much stronger in the Q3 (39%) and 9M (+75%) periods. Sales in the local market grew by 13% in Q3-18 vs. LY, but has grown by only 4% YtD. According to some of the distributors, there has been fairly good demand for 3-in-1 Hot Choco thus far this year, and consumers are increasingly aware of the gums (Cloret and Trident).
Gross profit margin recovered from 11% in Q2 to 26.5% in Q3– in line with the 26.1% estimated. The local prices of the company’s beverages and candies have been largely stable YtD from routine market checks and local sugar price is softer, compared to LY (-18% YtD). Though cocoa prices are up more than 17% YtD, it appears CADBURY’s backward integration via Stanmark is limiting the impact on production cost.
Another positive in the latest result, they stated, is the 2% decline in opex, with a ratio to revenue of 18%, vs. 22% in Q3-17. Compared to estimate, opex was higher by 1%.
Net finance cost of NGN110 million was reported during the three months period. Although finance cost (NGN130 million) was higher vs. Q3-17 (124% y/y), it reduced further from Q2-18, and has now fallen consistently since the peak of NGN210 million in Q4-17. The balance of overdraft facilities (the only debt in CADBURY’s balance sheet) has reduced markedly to NGN1.7 billion, from NGN1.9 billion at the beginning of the year.
According to them, CADBURY’s Q3 performance was better-than-expected. Given the current result, they now look for higher 2018 earnings than previously expected. They expect reaction to the result to be neutral.

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