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PZ Cussons foresees lower earnings on consumer fragility in UK, Nigeria

PZ Cussons Foundation

PZ Cussons Plc, one of the world’s biggest personal healthcare makers, has said that its top-line might trend lower in the first half of the current financial year on weak consumer demand in major markets albeit expressed optimism for a better second-half.

The company’s important markets are Nigeria, United Kingdom and Australia, with a combined population of about 295 million, accounting for over 65 percent to the group’s top-line.

But the sluggish recovery of the Nigerian economy which has not translated to improved purchasing power combined with Brexit-related uncertainties hurting the British economy and the highly competitive Australian economy weighed on the group’s revenue.

A dive into its full-year report for the period ended May 31, 2019, showed group’s revenue fell 6.8 percent to £689.4 million from £739.8 million in the previous period. Sales proceeds from its Europe & Americas, Asia Pacific, and African businesses shed 0.2 percent, 4.1 percent and 15.2 percent respectively.

Adjusted operating profit of the group fell by 10.7 percent in the 2019-year end to £76.5 million, spurred by a sharp 115.9 percent cut in its African segments.

A similar trend was observed in the first quarter of 2019 as revenue across all regions trended lower as a result of consumer uncertainty and heavy promotional activities among others.

“We anticipate market conditions will remain challenging across our key geographies for the balance sheet for the first half of the year,” the firm said in a statement on its website.

“Improvement is anticipated in the second half as planned marketing activities behind our focus brand and overhead reduction programs take effect,” it said, adding that the group would continue simplifying its activities going forward.

Shares of PZ Cussons declined 2.06 percent to 206 pence Wednesday on the London Stock Exchange (LSE), down 3.2 percent since January to grossly underperforming the LSE all share index that has gained a whopping 78 percent year long.

Its Nigerian segment continues to struggle for survival amid myriads of headwinds including intense market competition and tough operating environment.

The segment’s revenue and post-tax profit dipped 8 percent and 40 percent respectively in the full year 2018. Its Nigerian shares have tanked nearly by half since January, a reflection of the woes bedeviling consumer goods industry at large.

News broke early this year that PZ Cussons Nigeria Plc was about exiting Nigeria, but the personal healthcare maker later refuted it.

“Looking at the last three or four years, it has been challenging. We have been able to retain and grow our market share. We are still at the forefront of consumers,” said Christos Giannopoulous, chief executive of Nigerian subsidiary, earlier said at the 120th anniversary of the firm.

Regardless, the company has been consistent in delivering returns to investors by regular payment of dividends for straight 30 years.

“We expect the full-year results to be in line with the prior year, adjusted for the impact of disposals, but dependent on no further worsening in our key markets, specifically UK and Nigeria.”

 

Israel Odubola