Earnings Update: Cadbury Nigeria Plc Q3 2024 – Rising Costs and FX Volatility Exacerbate Net Loss

Event

Cadbury Nigeria Plc (“the Group”) recorded a strong 61% year-on-year revenue growth in Q3 2024, despite challenges posed by shrinking purchasing power of consumers and rising inflation. This impressive performance was driven by strategic pricing adjustments and an expanded product reach, which helped offset the impact of economic pressures on demand

The Group’s cost of sales grew by 88%, reaching N32.91 billion, up from N17.52 billion in Q3 2023. This significant rise in production costs was driven by inflation-related hikes in raw material prices and production expenses. Fierce competition within the consumer goods sector restricted the Group’s ability to raise prices enough to offset these higher costs, leading to a 1200 basis point decline in gross profit margin to 14% (down from 26% in Q3 2023).

Outlook

We anticipate sustained revenue growth driven by price increases through the remainder of 2024. However, the Group’s profitability will likely remain pressured due to inflation-driven cost input and shrinking disposable incomes, which may constrain volume sales. Additionally, the Group’s worsening FX situation is expected to further impact bottom-line.

Consequently, we slightly revised our fair value to N19.38 from N19.88. At the current trading price of N21.30, the stock offers a total return of -8.99%, thus we retain our HOLD recommendation for the stock.

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Thank you.