Cadbury Nigeria (Cadbury) reported Q2 2017 results yesterday. Similar to previous quarters, the company delivered decent topline growth of 20.6% y/y to N8.2bn. However, it recorded a pre-tax loss of –N862m, 80.7% worse than in Q2 2016. Although operating expenses were -4.5% lower y/y, the PBT was largely impacted by a -722bps y/y contraction in gross margin to 17.4%. Net finance charges of –N183m vs a net finance income of N30m also contributed to the loss. Post-tax loss of -N859m increased by 63.5% y/y. Sequentially, sales grew marginally, by 1.5% q/q, while both pre and post-tax losses compare with profits of N96m and N93m in Q1 2017 respectively.
The half year figures showed that sales were up 16.9% y/y while a pre-tax loss of –N766m compares with N216m profit in H1 2016. Again, gross margin contracted by -953bps y/y to 19.6%, offsetting a -5.0% decline in opex. With a zero tax expense, the post-tax loss of –N766m compares with N147m profit in prior year.
Compared with our forecasts, Q2 sales were 9.1% ahead; we had forecast the company to make a modest PBT of N80m. On an annualised basis, the results are tracking behind consensus 2017 sales and PBT forecasts of N35.2bn and N1.7bn respectively. Cadbury shares have gained +20.5% ytd but have underperformed the NSE ASI by -16.2%. We expect the stock to shed some of those gains, and a cut to consensus forecasts.
We rate the stock Neutral. Our estimates are under review.
Cadbury Nigeria Q2 2017 results vs. FBNQuest Research estimates (N millions)