Cadbury Nigeria, a chocolate and cocoa products company and a part of Mondelez International, has proposed to convert its $7.7 million debt owed to Cadbury Schweppes Overseas Ltd into equity. The Nigerian company borrowed $23 million from its overseas counterpart to settle third-party loans for raw material imports. Due to currency devaluation and the resultant pressure, Cadbury Nigeria faced an unrealized exchange loss of $22.5 million and a loss after tax of $11.1 million as of September 30, 2023. The proposed debt-to-equity conversion, subject to shareholder approval, aims to create 402 million shares at $0.019 per share, ultimately increasing Cadbury Schweppes' stake from 74.97 percent to 79.39 percent. This move is expected to deleverage the balance sheet, reduce foreign exchange risks, and enhance overall financial standing.
The conversion, scheduled for approval at an extraordinary meeting on February 8, 2024, is anticipated to create value for shareholders and stakeholders of Cadbury Nigeria. The resulting increase in equity is poised to improve liquidity, potentially channeled into strategic uses or returned to shareholders. The board emphasizes that this conversion will reduce finance costs, enhance profitability, and improve financial ratios, positively impacting the company's creditworthiness. Overall, the move aligns with Cadbury Nigeria's strategy to mitigate foreign exchange risks and bolster its financial resilience.