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   Market Date: 26-01-2015   
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Cadburys share price dips further

Category: Corporate Earnings

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Cadburys share price dips further

The share price of Cadbury Nigeria Plc shed another N2.57 on Wednesday to close lower at N48.88 per share as investors continued to respond to the confirmation of overstatements in the company’s financial accounts.


When the Chairman, Cadbury, Dr. Uduimo Itsueli, confirmed the overstatements on Tuesday, the equity dipped by 4.9 per cent or N2.70 to close at N51.45 per share.


Some market operators had said that the equity would shed more weight as more investors would dump the shares because of the projected loss to be recorded in the current year.


The outcome of investigations into cadbury’s financials by the new auditor, PriceWaterHouseCoopers, showed that the bottomline of the company was overstated by over N1.5bn.


“We also expect to make one-time exceptional charges in 2006 between N13bn and N15bn in respect of the profit and balance sheet overstatements, which will considerably diminish the company’s reserves,  Itsueli said.


An analysis by Meristem Securities Limited, showed that in correcting the financials, the company’s Net Asset Per Share had dropped from N10.86 as at December 2005, to about N0.99 as at September 30, 2006, resulting in about 91 per cent drop.


Earnings per share had entered the negative zone from a positive figure of N2.70 as at year ended December 2005.


MNL said, “Given the price mentality of the Nigerian investing public based on benefits (bonus and dividend), dividend payment for the next two years would be denied and bonus issue for at least five years after utilising the available capital reserves to absorb losses.


“In the same vein, the resulting capital reserve from planned revaluation exercise is also not available for capitalisation issue. 


The stockbroking firm predicted that Cadbury’s share price would drop significantly to stabilise at a range of N10 to N15. MSL added that the price would thereafter, depend on the actions of a new management team and the recovery performance of the company in 2007 financial year.


Meanwhile, an aggregate turnover of 261.22m shares worth N1.88bn was transacted at the stock market in 5,207 deals on Wednesday compared to Tuesday’s 149.17m shares valued at N1.73bn exchanged in 5,978 deals.


Similarly, The NSE All-Share Index suffered a marginal decline of 0.41 per cent to close at 32,205.06 points lower than 32,333.33 points at which it closed on the previous day, while total market capitalisation also dipped from N4.118tn to N4.102tn. - Punch


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