PZ Cussons Blames Nigeria Operating Environment Woes

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Consumer goods company, PZ Cussons Plc, with a major presence in Nigeria have blamed the Nigerian operating environment for its slowing performance according to reuters.
Group operating profits were broadly flat versus comparative period.
The company’s fortunes has witnessed strong performance in Europe offsetting a difficult trading environment in Nigeria and impact of weaker currencies in both Asia and Africa.
The company also predicted that performance in certain categories in Nigeria in second half is likely to continue to be affected by ongoing squeeze on consumer disposable income.
The company posted a depressing result in the first quarter of 2015 where its revenue recorded a flat growth year on year compared with the previous year, with revenue standing at relatively N14.9 billion (-0.47 per cent YoY).
PZ Cussons being a consumer goods company is very much exposed to the weakness in purchasing power of a lot of Nigerians.

Another problem it has had is the insurgency in the North which has badly hurt growth from that part of the country.
PZ’s first quarter result for the period ended August 31 2015 showed a pre-tax profits dropped of 7 per cent to N547 only. Other highlights of the result showed that revenue in the period stood at was relatively N14.9 billion (-0.47% YoY)
Revenue also recorded a flat growth YoY last year, while gross profit margin however fared better at 27.6 per cent compared to 26.9 per cent a year ago.
However, the problem with the company remains its operating cost. It reported a 7.5% rise in operating expenses to N3.4billion
Operating expenses also rose 9 per cent same period in 2014.The rise in operating expenses and flat growth in revenue continues to be a major problem for the consumer goods company.
Pre-tax profits dropped 37 per cent even higher than the 31% drop it recorded same period last year.
It said being a consumer goods company makes it much exposed to the weakness in purchasing power of a lot of Nigerians.
Another problem it has had is the insurgency in the North which has badly hurt growth from that part of the country.

The company had last year suggested that it was looking to the east and western part of the country to drive growth this year
However, the current capital controls on foreign used goods may well help impact positively on made in Nigeria goods and people shift to locally made goods and well-known products such as those sold by PZ.
Similarly, Goldman Sachs cut the rating of PZ Cussons (UK) down to “neutral” vs “buy” and removed it from pan-Europe buy list.
According to Reuters, Goldman reckons PZ Cussons (UK) has outperformed the sector by 14 percent YTD and has re-rated to 19x 12m fwd P/E, from 16x at the beginning of 2015.
PZ Cussons Nigeria, which happens to be the company’s biggest market reported pre-tax of N3.9 billion representing a 23 per cent drop year on year.
PZ Cussons Nigeria share price is up 33 per cent YTD and closed flat at N31.77.

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