PZ Cussons Heads For Another Profit Drop

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Profit loss suffered by consumer goods company, PZ Cussons Plc, for the second year at the end of its 2015 financial year ended May, may continue at the end of the current financial year ending May 2016. This is because the company lost one-third of the after tax profit on year-on-year basis at the end of its first quarter operations in August. The margin of profit drop is expected to widen at full year if the current growth rate is maintained. Profit drop accelerated in 2015 and looks likely to speed up further in the 2015/16 financial year.

The company’s weakening profit capacity reflects its inability to grow sales revenue for the fourth year running. The company has not been able to push sales revenue reasonably above the figure it posted in 2012 and the revenue weakness has continued to register adversely on profit performance.

It closed first quarter operations with a turnover of N14.92 billion, which a slip over the revenue figure in the same period last year. Based on the first quarter growth rate, turnover is projected at a little over N62 billion for PZ Cussons at the end of the 2015/16 financial year. This would be a drop of about 15% from the sales revenue of N73.13 billion it reported in 2015.

The company’s sales revenue has been virtually stagnant over the past three years. Flat revenue and rising cost have been the challenges facing the company. This year, the prospects for a drop in turnover have increased the operating pressure.

Given the inability to grow sales revenue, the company’s profit capacity has continued to weaken under rising costs. The company is able to keep all other major costs under control except interest expenses, which soared by about 504% to N164 million at the end of the first quarter. The company has lost profit margin from 4.3% in the first quarter of last year and from 6.3% at full year to 2.9% at the end of the first quarter of the current year.

The company reported an after tax profit of N428 million at the end of the first quarter, which represents a drop of 33.3% year-on-year. Based on the first quarter performance, after tax profit is projected at N2.6 billion for PZ Cussons at full year. This would be a drop of 43.1% from the after tax profit of N4.57 billion the company reported at the end of the last financial year. This will be an accelerated drop compared with the profit drops of 10% and 4.5% the company recorded in the preceding two years.

The company’s profit performance has followed a pattern of rise and fall over the past six years. Its after tax profit of N5.32 billion in 2013 was a recovery after two years of drops. The peak profit record remains the N5.58 billion it posted at the end of the 2009/10 financial year.

Earnings per share declined from N1.16 in the preceding year to N1.02 in 2015. It paid an interim dividend of 20 kobo per share last year and has announced a final dividend of 61 kobo per share. The company’s register is scheduled to close between 14th and 18th September while payment is slated for 30th September 2015.

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