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Cadbury Nigeria Plc will be needing a scheme of restructuring and recapitalisation to sustain its activity after a huge foreign exchange revaluation loss that took sector players unaware battered the consumer goods firm’s balance sheet.
The company’s retained earnings turned negative at N15.08 billion as at December 2023, from a positive figure of N13.30 billion as at December 2022.
It posted a loss after tax of N27.63 billion in December 2023 from a profit position of N583.11 million the previous year.
Drilling through the numbers shows the precarious situation was caused by foreign exchange loss of N36.02 billion and a N19.90 billion retained loss jeopardies the company’s ability to pay dividend unless it borrows to f0r such purposes.
Of course, the abrupt devaluation of the Naira by the central bank in June 2023 is deleterious to companies who have a lot of dollar denominated liabilities in their books.
However, there is light at the end of the tunnel because consumer goods firms are expected to rebound in the last two quarters of the year as after devaluation worries wanes.
“Though the exchange rate risk still lingers as the Naira weakens with low foreign capital inflow and low crude oil production, we do not anticipate as steep a devaluation as seen in 2023 in 2024, making us anticipate significantly lower FX losses in 2024,’’ said analysts at CSL Stockbrokers Limited in a recent note to client.
“The food, beverage, and sugar divisions of these businesses accounted for the majority of the revenue inflow for FMCG firms. The trickle effect of rising input costs along the value chain of these companies resulted in higher production costs which were passed on to end consumers through increases in prices,” said analysts at CSL Stockbrokers.
Cadbury seems poise for the aforementioned growth. Its performance at the top line (sales) is impressive. The company made a lot of profit from core activities.
Sales were up 45.57 percent to N80.37 billion in December 2023 from N55.21 billion the previous year.
Gross profit surged by 130.44 percent to N17.79 billion in the period under review from N7.72 billion the previous year.
Operating profit surged by 4,227 percent to N8.39 billion in December 2023 from N194.06 million the previous year.
“New product launches from Cadbury and Flourmill have expanded their revenue segments and generated additional sales. A diverse production of essential goods has been the strategy keeping the revenue from FMCG companies elevated in 2023,” said analysts at CSL Stockbrokers.
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