Naira devaluation, turmoil in North East impact PZ Cussons half year outlook

The recent devaluation of the naira and continuing turmoil in the North East of the country will negatively impact PZ Cussons operations, according to a trading update in respect of the half year to November 30, 2014, released by the company.

“In Nigeria, disruption in the North of the country has continued at a high level, resulting in a decline in sales in that region. Good growth has continued in the South of the country, in particular in the electrical goods business and in the two food and nutrition joint ventures. While Nigeria has been declared Ebola free, there has been a negative impact on cross-border trade,” said PZ in the update released December 10.

“Overall, operating profits in Nigeria were lower than the comparative period both as a result of tough trading conditions, particularly in the North, and of the 8 percent devaluation of the naira towards the end of the period,” it noted.

Performance in the smaller markets of Ghana and Kenya was in line with expectations, according to PZ.

The macro environment in Nigeria in the second half, which includes the February presidential elections and potential further currency volatility, will be a key contributing factor to the overall result for the full year, the update said.

“The Group remains focussed on a dynamic and fast brand renovation and innovation programme, an ongoing cost reduction programme and successful delivery of new areas of growth such as Rafferty’s Garden, Five:AM and the PZ Wilmar joint venture,” PZ said.

These initiatives will contribute towards offsetting the continuing macro challenges, particularly in Nigeria, and the reduction in profits from Poland as a result of last year’s Home Care brands sale, according to the firm.

Operating profits in Europe and Asia were higher than the comparative period last year, however, they were lower in Africa as a result of challenging trading conditions and the devaluation of the naira towards the end of the period.

Taken together Group operating profits were 4 percent below that of the comparative period.

Excluding the impact of exchange rates, operating profits were flat period on period.

The financial position of the Group remains strong with cash generation during the period in line with expectations, according to PZ.

In the UK, performance in the washing and bathing division was strong despite challenging trading conditions and driven by an exciting innovation pipeline.

Performance in the smaller markets of Poland and Greece was in line with expectations.

In Indonesia, the babycare portfolio has been expanded in the period with the launch of new products whilst non-babycare brands such as Original Source are performing well.

PZ interim results for the half year to 30 November 2014 will be announced on Tuesday, January 27, 2015, according to the firm. An analysts’ presentation will be given at 9:30am on that day.

PATRICK ATUANYA