Nigeria: Cadbury reports strong growth, Unilever’s profits fall

A tale of two companies: Confectionery company Cadbury Nigeria has reported 32% growth in Q1 2019 gross profits to N2.4bn ($6.68m) compared to Q12018. Sales rose by 12.7% to N9.2bn ($25.62m) while net profit rose by 21.95%. Meanwhile Unilever Nigeria, has reported a 45% fall in profit before tax to N2.03bn ($5.63m).

It’s been a strong quarter for Cadbury in Nigeria, driven by a growth in demand and better management of its cost, including finance costs. Its beverage category (which includes hot chocolate brands like Bournvita) accounts for 61% of sales, while confectionery (sugar confectionery brands such as Tom Tom and Buttermint, gum brands such as Trident and Clorets) accounts for 29% of sales. Cocoa derivatives account for the remaining 10% of sales.

Much of the credit for the turnaround has been credited to outgoing Managing Director Amir Shamsi, who moves on to a new role at parent company Mondelez International (which owns 75% of Cadbury Nigeria).

It’s a different story at Unilever Nigeria, where profit after tax has fallen by 47.5% year on year to N1.52bn ($4.22m) down from N2.90bn $8.04m in Q1 2018. Revenue dropped from N24.2bn ($67.3m) in Q1 2018 to N19.2bn ($53.4m) in 2019 – a 20.6% fall year on year. This fall in revenue was largely due to sale of its margarine business (including the Blueband brand) to Sigman Bidco, a Dutch investment firm, which happened in July 2018. The reasoning behind the deal was to boost shareholder value. There is little evidence of that in this new set of results.

Compare against last year when Unilever’s revenues in Nigeria surged by 16% to N25.82bn ($71.8m) in Q1 2018 from N22.17bn ($61.7m) recorded in Q1 2017 and it looked like a strong turnaround was on the cards. Instead, Unilever’s revenues have fallen for three consecutive quarters in Nigeria. This is to be expected, perhaps after a major sale. But shareholders will be left wondering what the company’s plan in 2019 is to create profit growth and the focus on shareholder value the sale of the spreads business was supposed to deliver.