Cadbury Nigeria Plc profit for the first quarter of the year dropped to three year low as rising inflation continues to erode the purchasing powers of consumers who were hard hit by the coronavirus pandemic.
Cadbury operates in an environment that makes it difficult to make money from core operations, and delivering the desired returns in form of bumper dividend and share appreciation is a herculean task for captains of industry.
For the year’s first three months through March 2021, the company’s net income reduced by 62.19 percent to N241.57 million, the lowest since 2019 when companies were riding on a hike in the price of the product and relative benign foreign exchange environment that offered a glimmer of hope.
Revenues increased by a mere 4.34 percent to N8.92 billion in March 2021 from N8.55 billion as at March 2020.
Cadbury is not efficient at using its labor and supplies in producing goods or services as gross profit fell by 35.08 percent to N1.48 billion in the period under review from 2.28 billion the previous year.
The company is not making enough earnings from its core business as operating profit dipped by 63.44 percent to N322.56 million as at March 2021, but it has enough left to cover finance costs.
The consumer goods firms are grappling with rising inflation that undermine demand as consumer wallets are squeezed, devaluation of the currency that balloons cost of production, and decrepit infrastructure that disrupts the flow of movement from the ports to the warehouses and production floor.
Nigeria’s unemployment rate rises to 33.30 in the three months to December 2020, the second highest on the global list. That’s up from 27.10 percent in the second quarter of 2020, according to a recent data from the National Bureau of Statistics (NBS).
Nigeria’s inflation rate for the month of March 2020, rose to 18.17 percent from 17.33 percent recorded in February 2021. This represents 0.82 percent points higher than the February figures.
The country’s misery index is at 51.47 percent, which makes it rank among the six most miserable countries in the world.
Nigeria’s Gross Domestic Product (GDP) grew by 0.11 percent (year-on-year) in real terms in the fourth quarter of 2020, representing the first positive quarterly growth in the last three quarters.
There are indications that the consumer wallets will be under pressure this year as the government mulls hike in pump prices as it is poised to deregulate the downstream oil and gas industry.
At the start of the year, the Federal government implemented a VAT hike of 50.0 percent to 7.5 percent in Feb-2020. Shortly after, the Covid-19 pandemic hit, leading to job losses and wage cuts.
That double whammy for Cadbury that is already walking rotten ice as margins are increasingly deteriorating.
The company’s operating profit margins fell to 3.61 percent to N3.61 billion in March 2021 from 10.31 percent the previous year, according to MoneyCentral calculations.
Also net margins reduced to 2.70 percent in the period under review from 7.47 percent the previous year while gross margins dipped to 16.69 percent in March 2020 from 26.62 percent the previous year.