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Published On: Mon, Apr 10th, 2017

Cadbury closes loss gap by 64 per cent

 

OKEY ONYENWEAKU

There are often mixed feelings any time Cadbury Nigeria is mentioned. The name tends to evoke distrust sometimes. But the company has since put the past behind it. What matters most to the organization now is to rapidly return to profitability.

Many industry expert share this optimism, but fear that it might take a longer time than the management originally envisaged. The unfavourable operating environment induced by the general economic contraction has been fingered as the major impediment.

The confectioner, previously Nigeria’s largest company in that category, has offered investors a sour stew of profitability over the last two years.  Indeed, the company has turned loss making into an ugly art form as its books continue to swim in red paint.

Recent figures for its annual statement for 2016 have been singularly unimpressive. The giant beverage maker posted a net loss of N563 million for the year ended 31, 2016, an indication that it is closing the hole by 64 per cent. This is however, good news to those who are ready to remain patient with the company.

In the last three years, Cadbury has come under severe pressure in a slowing economy. The development has invoked fear and hopelessness on the part of shareholders. Many industry analysts observe that Cadbury with its one product line will remain uncompetitive in an economy with inflation hovering over 18 percent per annum. The company suffers from huge setbacks as a result of local currency devaluation (semi- floating of the naira by the CBN) that has made borrowing costs prohibitive and nudged up costs of goods sold by the firm.

‘’Continued difficulties with obtaining foreign exchange to buy needed raw materials, a weakened consumer purchasing power, and competition from rivals in the market are also somewhat have affected the company badly’’, others have said.

Those who took position in the company’s stock may be confused by their present misfortune since the announcement of its losses. The company did not fare any better in 2015

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The Food and beverage producer, Cadbury Nigeria Plc posted a loss before tax of N563 million in the year ended December 31, 2016 compared to a pretax profit of N1.58 billion recorded a year earlier.

Similarly, the company declared a loss after tax of N296 million compared to N1.15 billion in the corresponding period of 2015.

Revenue of Cadbury Nigeria climbed 7.41 percent to N29.79 billion in 2016 end from N27.82 billion posted a year ago, the food and beverage producer said.

The company’s board of directors said there is no dividend pay out to investors of the company for the period ended December 31, 2016.

“The Directors are not recommending to shareholders the declaration of a dividend, in light of the performance of the business during the year under review,” according to Cadbury Nigeria’s audited statement for the period ended December 31, 2016.

In 2015 audited year end, the company paid to its shareholders a dividend of 65 kobo per share which amounted to N1.22 billion.Shares of the food and beverage producer at the close of the trading session on the Nigerian bourse traded at N9.46 per share as at January 3,2017 and closed last Friday April 7, 2017  as same price.

Shareholders of Cadbury said they did not expect anything less given the difficult operating environment.

‘’What could you have expected from a company that operated with lack of foreign exchange to buy raw materials’’, President National shareholders’ Association of Nigeria, Chief Timothy Adesiyan said.

From a strong confectionery company whose products dominated the market especially Bournvita, which was served on the breakfast table of every household, to a firm that appears over-whelmed by stiff competition, Cadbury seem to be fighting for survival as it is increasingly losing ground to competitors such as Nestle Nigeria with Milo, Promasidor with Cowbell, Ovaltine, among other related products which come in very small packages.

Indicative of a company which may continue to be that of struggling is evidenced in a market survey among 20 mothers within Ogba and Ikeja axis of Lagos State in which 16 said they preferred Milo to Bournvita for their children.

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Industry analysts have expressed reservations on the dismal performance of the company which was a blue-chip and competed favourably with the likes of Nestle Nigeria for market share.They reckon that apart from the rocky operating environment, they can put a finger to the challenges of Cadbury.

A source, who have keenly followed the progress of Cadbury told Business Hallmark that in addition to its lean product line with Bournvita, Tom-Tom, Buttermint and the company has also been troubled by the introduction of some failed products and management issues in the last eight years.

Apart from the development limiting its competitive edge the source noted, Kraft International which acquired Cadbury in 2012 has not helped matters as its subsidiary, Mondelez, the snacks branch of the parent Company, is not inclined to help the company to reinvent itself with fresh investment and product development.

He also noted that the company’s cash-cow, Bournvita which accounts for about 80% of its revenues is facing very stiff competition in the market.

However, the spokesman of the Company Mr.BalaYesufu told Business Hallmark that it was not possible to divorce Cadbury’s weak performance from the realities of weak economy and unfavourable operating environment which even includes insurgency in the Northern Nigeria and lack of infrastructure.

MARKET SHARE

It is not very easy to determine Cadbury’s market share.  Whatever the situation, its products are still market leaders in the market, a position it has occupied since the 70’s. Bournvita, Tom Tom and Buttermint are popular names that are dominant in Africa.

The new rebranding and the direct sales strategy it recently adopted may have shot up its market share again.

Investors in the shares of Cadbury Nigeria have lost 84 per cent in two and a quarter years as its price fell from N56.61 per share on January 2014 to N9.46 on April 7, 2017.

 

 

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