Thursday, July 27, 2017 10.55AM / FBNQuest Research
Event: Cadbury Nigeria (Cadbury) reports Q2 2017 results
Implications: Downward revision to consensus estimates likely
Positives: Sales up 20.6% y/y
Negatives: Pre- and post-tax losses of over N850m
Cadbury Nigeria (Cadbury) reported Q2 2017 results yesterday. Similar to previous quarters, the company delivered decent topline growth of 20.6% y/y to N8.2bn.
However, it recorded a pre-tax loss of –N862m, 80.7% worse than in Q2 2016. Although operating expenses were -4.5% lower y/y, the PBT was largely impacted by a -722bps y/y contraction in gross margin to 17.4%. Net finance charges of –N183m vs a net finance income of N30m also contributed to the loss. Post-tax loss of -N859m increased by 63.5% y/y.
Sequentially, sales grew marginally, by 1.5% q/q, while both pre and post-tax losses compare with profits of N96m and N93m in Q1 2017 respectively.
The half year figures showed that sales were up 16.9% y/y while a pre-tax loss of –N766m compares with N216m profit in H1 2016. Again, gross margin contracted by -953bps y/y to 19.6%, offsetting a -5.0% decline in opex. With a zero tax expense, the post-tax loss of –N766m compares with N147m profit in prior year.
Compared with our forecasts, Q2 sales were 9.1% ahead; we had forecast the company to make a modest PBT of N80m. On an annualised basis, the results are tracking behind consensus 2017 sales and PBT forecasts of N35.2bn and N1.7bn respectively. Cadbury shares have gained +20.5% ytd but have underperformed the NSE ASI by -16.2%. We expect the stock to shed some of those gains, and a cut to consensus forecasts.
We rate the stock Neutral. Our estimates are under review.
Cadbury Nigeria Q2 2017 results vs. FBNQuest Research estimates (N millions)
1. CADBURY Declares N766.39 million Loss in Q2'17 Result, (SP:N12.40k)
2. CADBURY Declares N92.95 million PAT in Q1'17 Result,(SP:N9.30k)
3. CADBURY Declares N296.4 million Loss in 2016 Audited Results,(SP:N7.41k)
4. CADBURY declares N842.16 million Loss in Q3'16 Result,(SP:N13.82k)
5. Cadbury Plc Q2 2016 Sales Down by 8.2% YoY; Downward Revision to Consensus Likely
6. CADBURY declares N672.82 million PAT in Q1'16 Result,(SP:N16.85k)
7. CADBURY declares N147.15 million PAT in Q2'16 Result,(SP:N16.10k)