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Cadbury's fantastic 3Q performance

Nov 3, 2000

Improved operating margins helped Chocolate King Cadbury to record a growth of 32% in profits for the third quarter ended September 2000. Excluding the adjustment for VRS expenditure profits have increased by 26%.

(Rs m)3QFY003QFY01Change
Sales 1,668 1,867 11.9%
Other Income 31 23 -26.5%
Expenditure 1,424 1,539 8.0%
Operating Profit (EBDIT) 243 328 34.7%
Operating Profit Margin (%)14.6%17.6% 
Interest 9 6 -24.7%
Depreciation 63 67 5.7%
Profit before Tax20227737.1%
Other Adjustments2-6 
Tax6610660.1%
Profit after Tax/(Loss) 135 178 32.2%
Net profit margin (%)8.2%9.2% 
No. of Shares (eoy) (m) 23.8 35.7  
Diluted number of shares (m) 35.7 35.7  
Diluted Earnings per share*15.119.9 
P/E (at current price) 41 31  
*(annualised)   

Cost control initiatives taken by the company and better efficiencies resulted in improvement in profit margins. Raw material cost of the company increased by mere 2% due to low cocoa prices. Cocoa account for around 48% of total raw material cost of the company. However, higher sales promotion expenses, 12% of sales in 3QFY01 (10% as on December 1999) slowed down the profit growth of the company. But it has actually helped Cadbury in maintaining topline growth in the scenario of increasing challenges in the market.

At the current market price of Rs 613 Cadbury is trading at a P/E multiple of 31 times its 3QFY01 annualised earnings and 41 times its FY01 annualised earnings. The company has a market cap to sales ratio of 3.8 times which is comparatively higher than its peers in the industry. Our projections are in line with the company's performance during the 9 months ended September 2000.

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