Headlines
Cadbury in bumper harvest, posts 249% profit
Oyeyimika Adeboye, MD Cadbury Nigeria Plc.
By OKEY ONYENWEAKU
From its loss position in 2016, Cadbury has hit the bulls-eye with a huge profit score that has reversed the picture of a blue chip with seemingly bleak fortunes and with no prospects of a brighter outlook for the future. The giant beverage company has posted a heart gladdening result for the second year consecutively.
Underscoring the good tidings in the company at the moment, it has to be remembered that in 2016, Cadbury had posted a loss of N 562,871 million caused by not only stiffer competition and thin product lines, but more as a result of the economic depression in 2016 when the country slipped into a recession that lasted well into 2017.
Even further back, two years before 2016, the company had equally shown relative strength with animproved profit before tax position though it was to later drop from that upscale N2.385billion PAT score in 2014 to a less robust figure of N1.577billion in 2015.
Put in perspective across the span of the decade then, it is therefore quite reassuring that the company, which almost caused heartaches for many of its teeming shareholders when it suffered a huge setback hinged on corporate governance challenges, has presently rebounded to the current point when it is recording extra-ordinary profit growth of 249 per cent in 2018.
After a protracted setback which prompted the board and management of the company to revert to the drawing board to hack out new strategies to refocus Cadbury, it has navigated out from the red region to the positive.
Though it is yet to attain the record performance of 2014 when its profit hovered around the N2billion mark,the conglomerate had signalled that it had already begun a new phase in its story, complete with steady cycles of profitability, when it leaptto a profit before tax position of N350.317million in 2017.
And now, the management of the beverage giant, is posting a profit of N1.222 billion to further positively change the fortunes of its owners in the financial year ended December 2018. Instructively also, its topline also grew 9 per cent to N35.975billion in 2018.
While its inventories declined marginally from N6.252billion in the preceding year to N5.865billion in 2018, an indication that it sold more products this year,total assets dropped to N27.528billion from N28.423billion in 2017.
Had Cadbury not paid a huge tax of N399.746 million in 2018, representing a 694.4 per cent spike from the N50.319 millionit paid in 2018, its profit position would have even been boosted further.
Most impressivelyhowever is the company’s magical act of putting smiles on the faces of its investors, having paid dividends in 2015 and 2017 and now 2018 after about a decade of dividend drought.
Accordingly then, shareholders of Cadbury are once again smiling to the banks as the company increased its dividend pay-out from N301.5 million in 2017 to N471.4million in 2018, translating to 30 kobo per share
Cadbury, market observers believe, has gained traction and is rebuilding its bottom line. At the close of business for the year ended December 31, 2018, its retained earnings rose from N7.045billion to N7.965billion even as it continues to most actively grapple with the escalating cost of sales crisis in the economy. In its own case, it rose 9.2 per cent from the N25.644billion utilised in 2017 to N28.017 billion in 2018.
Beyond these however, a critical look at the company’s books shows that revenue has been dropping since 2012. The exceptions were in 2013 when it achieved a figure of N35.7billion and 2018 when it clocked N35.9 billion in revenue returns. Similarly, profit had also been on the plunge since 2012 except in 2013 when its profit stood at N6.081billion. This was before the loss of N296. 4 billion in 2016. Overall also, analysts seem uncomfortable with the rising cost of sales which has been inching higher in the three successive quarters of 2018.
Keeping his deye on the ball, Chairman of the company, Mr. Atedo Peterside, had pledged that the company would sustain its focus on quality, drive improvement in productivity and reinforce operational efficiencies in order to maximize its competitive advantage.
“Also, the company intends to drive growth ahead of competition to increase market share within its product categories, developing an organisation of high potential talent and sustaining the company’s aggressive Route-to-Market initiatives,” Peterside had made his remarks last year and the consequent reflection of it in the2018 results is obvious.
But even more comforting for Cadbury’s investors is the fact that the company which has struggled to survive in the last 10 years is now showing signs of better vision and management.
The company may be walking the talk given its chairman, Mr. PetersideAtedo’spromise that the companywould increaseits market share. He stated this last year at its 55thAnnual General Meeting where he also gave insights as to how the company generated its 2017 revenues. According to him, 55 percent came from refreshment beverages which include Bournvita and Cadbury’s 3-in-1 hot chocolate, while 31 percent was from confectioneries such as Tom-Tom peppermint and its variants. 14 percent came from intermediate cocoa products comprising cocoa powder, cocoa cake and cocoa butter.
Challenges
Despitethe introduction of the Nigerian Autonomous Foreign Exchange Rate Fixing NAFEX, to improve upon the forex liquidity situation in the country, Cadbury periodically witnesses ‘continued difficulties with obtaining foreign exchange to buy needed raw materials. Weakened consumer purchasing power and competition from rivals in the market also have affected the company badly,”market experts have said.
Whereas the company has come to be seen recently as one that recognises the importance of adhering to the best governance principles and practices, its mis-steps about 13 years ago appear to still haunt it.
In this light, experts and market watchers have not stopped referring to the incident of 2005/2006 when the management of Cadbury Nigeria Plc under the leadership of Mr. Bunmi Oni mis-stated its accounts to make the company look good. As they continue to note, Cadbury Nigeria Plc had deliberately manipulated and overstated its financial statement to boost its image as well as push up its stock price.
During that period, the company inflated its Turnover, Profit and other performance indices; leading to an inquiry which threw up the facts that the manipulation, which was discovered in 2006, had actually started in 2002. The major culprits were the former Managing Director, Mr. Bunmi Oni and former Finance Director of the company, Mr. Ayo Kadiri.
This act of deception, the investigations revealed,had lured investors into betting on the company’s stock believing that it had good fundamentals. As a result, the Securities and Exchange Commission (SEC) waded into the matter and banned Mr. Bunmi Oni and Mr. Ayo Akadiri, from operating in the nation’s capital market thenceforth or even holding the directorship of any quoted company in Nigeria.
SEC also fined Cadbury for filing financial statements that contained untrue/ misleading statements; and trading on its shares was suspended for about three months while it was being investigated. Some other directors of the Company and senior management staff were equally sacked.
Its External Auditor, Akintola Williams Delloite and Registrar, Union Registrar Limited were also sanctioned.
Apart from Oni and Akadiri’s ban, others recommended for investigation and prosecution include Dr.UduimoItsueli, Chairman of the company, Mr. J. S. Bogunjoko, Mr. Abiodun Jaji, Mr. Andrew Baker, Mr. Christopher Okeke, Mr. OlatundeFalase, Chief Raymond Ihyembe, Mr. Gabriel Onabote, Mr. Olusegun Oyewole, Mr. Matthew Shattock, Mr. Olusegun Aina, Mr. AkinbodeGbolahan and Mr. Tunde Egbeyemi.
Notwithstanding the misrepresentations, Cadbury still maintained a track record of consistently paying dividends to shareholders from 1977 to 2006 while bonuses also came occasionally, and indeed for 13 times.
Indeed, Cadbury has been seen as a blue-chip company by virtue of its performance in the capital market over the years. Its 2004 and 2005, performance indicators gave credence to this. For instance, it recorded N2.8billion profit after tax in 2004 and N2.7 billion in 2005.
This was also when its mouth-watering dividend stood at N1.60 and N1.30 per share. Its investors smiled to the bank as it paid a dividend of N1.6billion in 2004 and N1.3 billion in 2005. But after trouble hit, it could not pay dividends in 2006, 2007 and 2008. In fact, the company only paid dividends again in 2015 and 2017 in the first instance, and now the recent 2018 dividends payout.
Beyond these, the facts show that the company appears to be struggling to regain its blue-chip status. First, the company has only paid dividends twice, that is in 2015, 2017,and now 2018 since the crisis of 2006. Second, its performance has also been very weak and unimpressivethough it may have begun picking up on this score with its 2018 results Thirdly, compared with a firm like Nestle Nigeria, Cadbury’s performance it appears has not been quite favourable.
Cadbury’s products were highly competitive and some of its brands had indeed been market leaders. Observers believe that one of its flagship products in particular, Tom Tom, had achieved deep penetration in every nook and cranny of West Africa. And while Bournvitais still the food drink for many, brands like Buttermint, Eclairs, Bubba and Trebor mints are still very strong and competitive.
That is however also arguable now as many competitors may have over taken Cadbury’s products in the market.
Cadbury as an investment option
To invest in Cadbury now is dicey. The company has only made profits in 2015 and 2017 and recently in 2018,counting from 2006 todate. Investors were only paid 65 kobo per share as dividend in 2015 and 16 kobo in 2017 and 30kobo. Investors believe the act could signify better times in future.
Broad street observers noted that the company’s stock is not only lagging behind in value because of its predicament but that the current weak market is also taking a toll on its shares. However, while its stock has lost 32.90 per cent year on year, it is trending with the weak market which lost at the close of business in 2018 at 10.90 per share. Its share price stood at 10.90 per share in March 29, 2019.
The company’s share price is a far cry from its competitor Nestle Nigeria Plc which share price closed at N1,497 on March 29, 2019
However, Cadbury Nigeria’s management had assured shareholders that the company would focus on four key strategic initiatives to realize its growth ambitions this year, after taking major hits in sales and profit in the previous years.
Its management had told investors that the company would concentrate efforts at increasing its market share in the powdered-drink and candy categories while investing in innovation and the enhancement of its product portfolio.
“One of the major strengths of our company has been operational efficiency, as aligned with global best practices.
”Constant improvements in operational efficiency helped us to offset difficulties in the operating environment,” the management had said. But market observers are worried that the company has found it difficult to re-invent itself. And they have queried how a company that wants to remain competitive depends on very slim product lines.
Managing Director, Crane Securities limited, Mr. Mike Ezeh told BusinessHallmark that the incident of financial mis-statement of 2005/2006 is still haunting the company. This is in addition to what he calls its conservatism.
President, Progressive Shareholders’ Association of Nigeria, Mr. Boniface Okezie believes that Cadbury still has the potential to turn its fortunes around but he advised its management to show aggression in marketing as well as increase its product lines.
Cadbury Nigeria Plc recently appointed Mrs. OyeyimikaAdeboye as Managing Director, effective 1st April 2019. Mrs. Adeboye takes over from Mr. Amir Shamsi, who moves on to a new role within Mondelēz International, the parent company of Cadbury Nigeria.
Mrs. Adeboye is the first woman to be appointed Managing Director since the establishment of Cadbury Nigeria over five decades ago.
Mrs. Adeboye, a chartered accountant, joined the Board of the Company in November 2008, as Finance and Strategy Director, West Africa.
A few market analysts still believe that Cadbury may yet be able to fend off its challenges and return to vigour soon.
In the early 1960s, an initial operation was established to re-pack imported bulk products. This packing operation grew rapidly into a fully-fledged manufacturing operation and resulted in the incorporation of Cadbury Nigeria Limited in January 1965. In 1976, the firm became a publicly listed company with shares traded locally on the Nigerian Stock Exchange.
Cadbury Nigeria has grown to become a household name, providing consumers with much-loved brands and revenue of N35.7b in 2013.
