Cadbury’s profit before tax drop by 80% to N1.46bn

With the recent extraction at the weekend at the Nigerian Stock Exchange (NSE), showing drop in growths in all key performance indices, damping strong performance outlook of one of the leading consumer goods companies in the country.

Cadbury Nigeria Plc has reported 80 per cent drop in pre-tax profits for the 2014 financial year as top-line and bottom line earnings showed considerable declines with gross earnings equally down by 15 per cent.

Consequently, profit before tax dropped by 80 per cent to N1.467 billion from N7.421 billion recorded in 2013 while profit after tax also decreased by 75 per cent to N1.512 billion during the period under review as against N6.023 billion recorded in 2013. Revenue was also down by 15 per cent during from N35.760 billion to N30.518 billion.

The company’s dwindling fortune began in the first quarter of 2014 as earnings were compressed by weak sales, leading to a dip in pre-tax profit by 31.31 per cent relative to the reduction in gross profit to N1.15 billion in March, 2014, from N1.68 billion in March 2013.

This was principally due to the decline of 43.64 per cent in net finance income to N274.59 million in March 2014 from N487.23 million in March 2013, according to market watchers. The decline in the first quarter, which signaled worry to investors, were sustained during the second quarter, as the company posted a 50 per cent decline in post-tax profits during the half year ended June 30, 2014.

The company, in a filing with the Exchange, said that its half-year net earnings decreased from N2.51 billion in 2013 to N1.26 billion, accounting for a drop of 50 per cent. Similarly, pre- tax profit fell to N1.79 billion, down 50 per cent from N3.58 billion in the same period last year.

Turnover equally decreased by 12.1 per cent to N15.32 billion during the six months to June 30 from N17.46 billion recorded during the comparable period of 2013. Cadbury Nigeria had said that the reason behind its capital reduction was due to the excess capital in its disposal to attend to the needs of the company.

Capital reduction entails the decrease of the company‘ s share capital and share premium and the return of this capital to the company’s shareholders. Managing Director, Cadbury Nigeria Plc, Mr. Emil Moskofian, who stated this while addressing stock market community at the company’s facts behind the capital reduction, said that the company’s projections indicated that it would generate sufficient capital to meet its expansionary and operational requirements.

Moskofian noted that rather than invest the excess capital on behalf of shareholders at what might be sub-optimal returns, the board of directors decided to recommend the return of excess capital to shareholders who are best placed to take their own investment decisions.