Cadbury sustained her solid earnings momentum in Q2 2022 by reporting stellar revenue and net profit growth. Revenue rose by 57% YoY to N15.09bn, while net profit expanded by 1,427 basis points (bps) to N800mn (Q2 2021: net loss of N861mn).

Owing to the persistent rise in input costs, we posit that the Company implemented price increases to protect margins. The effective transfer of cost burden to consumers resulted in a 281% YoY increase in gross profit. Meanwhile, operating expenses grew by just 4% YoY, which emphasised the Company’s operating efficiency. The combined impact of price increases and operating efficiency delivered an earnings rebound for the Company.

However, despite the rather impressive topline growth, we note the material increase in inventory. On a quarter-on-quarter basis, inventory levels increased by 20% with ‘goods-in-transit’ accounting for 100% of the increase. This suggests that finished goods were stuck en route to the market. In our view, we link the development to higher transportation costs, particularly relating to higher diesel prices.


Given the relatively stellar performance in Q2 2022 and Q1 2022, we revised our FY 2022 earnings estimate upwards to reflect the improved business fundamentals. We now expect earnings per share to close at N2.39 in FY 2022 (previous: N1.75). However, our dividend forecast remained unchanged at N1.00.

In the medium term, we expect growth to moderate due to underlying weaknesses in the economy. Specifically, erosion of consumer purchasing power amid declining income levels rising inflationary pressure, and heightened competitive pressures are some of the challenges that we expect to negatively impact the Company’s financial performance.

After incorporating our near-term and medium-term growth outlook, we recommend a HOLD for the stock at an estimated fair value of N17.02. We believe that the stock’s current share price already incorporates its long-term growth prospects.

Please follow the link “Cadbury Nigeria Plc Q2 2022 – Rebound to Growth Despite Operational Bottlenecks”  to view the whole report.

Thank you.

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