Overview
The origin of PZ Cussons Nigeria Plc, a subsidiary of Manchester-based PZ Cussons, dates back to 1800s when George Paterson and George Zochonis established a trading post in Sierra Leone to transact business between United Kingdom and West Africa amid a slow and difficult journey.
The business model of the company revolves manufacture, distribution and sale of personal healthcare goods and electrical products, with strong brands in Imperial Leather, Cusson Baby, Morning Fresh and Thermocool in the Nigerian market.
PZ Cusson Nigeria Plc operates in five segments, personal care, beauty, home care, electrical and food & nutrition. The company operates a joint venture electrical superstore in Lagos, and also operates in Ghana and Kenya, and was granted listing on the Nigerian Stock Exchange (NSE) in 1972.
The parent company, PZ Cussons, listed on the London Stock Exchange (LSE), has a presence in 11 countries across Africa, Europe and Australia. The group has a staff size of 4, 486 worldwide.
PZ Cussons celebrated its 120 years of doing business in Africa’s most populous nation a few days ago, having begun operations in 1899.
Corporate Governance
Information from PZ Cussons 2018 full year report states that the company has a board consisting of ten (10) Directors: Five Non-Executive Directors and Five Executive Directors.
In line with best practices, the company separates the position of the Chairman of Board from that of the Group Chief Executive Officer. Chief Kolawole B. Jamodu, CFR, is the Chairman Non-Executive Director of the Board, while Christos Glannopoulos is the company’s Chief Executive Officer.
Glannopoulos boasts of almost 17 years of engagement with PZ Cussons Nigeria Plc where he has risen through the ranks, starting as Head of Sales in 2002. Glannopoulos holds a degree in Business Administration from South Trafford College and his long list of alma maters include Athens College, Conconcord College, University of Derby and Institut Européen d’Administration des Affaires (INSEAD).
Prior to time with PZ Cussons Nigeria, Glannopoulos had spent four years as Managing Director PZ Cussons East Africa Ltd and another four years as Regional manager across East and West Indonesia.
Other current members of the board include Non-Executive Directors: L. Batagarawa, and Paul Usoro SAN, Independent Non-Executive Directors: E. Ebi, Mallam and D. Muhammed, while the Executive Directors are J. Coker, A. Goma, P. Baretto and G. Sotiropoulos. David Petzer resigned from the board on February 20, 2018.
Corporate History
The journey of PZ Cussons in Nigeria began in 1899 when it’s first local branch office was set up. This landmark was about 15 years after George Henry Paterson and George Basil Zochonis had established commerce between West Africa and the United Kingdom from a trading post set up in Sierra-Leone.
With the advent of the 20th century, PZ Cussons was able to expand rapidly and establish bases across Africa, Europe and Asian.
The company opened its first soap factory in Nigeria by 1948 and incorporated on December 4 of 1948 under the name of P.B. Nicholas & company limited although it changed the name to Alagbon Industries limited in 1953, then Associated Industries Limited in 1960.
As a testament to its growth, PZ Cussons successfully listed on the London Stock Exchange in 1953 and even expanded its production activities in West Africa to Ghana in 1970.
The period coincided with the oil boom in Nigeria which took off in the early 1970s and the saw a substantial improvement in purchasing power of households. PZ Cussons took steps to take advantage of growing opportunities in the Nigerian market and establish its presence as a reliable household brand.
Consequently, PZ Cussons listed on the Nigeria Stock Exchange in 1972 to bolster operations and introduce more products line that would serve the need of the Nigerian consumers.
The expansion plan saw PZ Cussons play in the detergent and refrigerator market in Nigeria, acquire the Greek food business Minerva and UK Company Cussons which brought the premium household soap brand Imperial Leather under its banner.
On November 24, 1976, the company’s name was changed from Associated Industries Limited to Paterson Zochonis Industries limited, before Paterson Zochonis Industries Plc was adopted in 1990 in accordance with the Companies and Allied Matters Act.
As yet another century ended, PZ Cussons upped its game to remain competitive and continue in its tradition of value-addition to the consumers.
In 2002, the company changed from Paterson Zochonis Plc to its familiar name-PZ Cussons Plc- and within the first decade of the new millennium acquired a number of brands including Original Source, Charles Worthington premium hair care business and leading UK spa brand Sanctuary Spa.
PZ Cussons Plc also created Nutricima – a joint venture with Glanbia plc – to supply evaporated milk and milk powder in Nigeria.
But there was no slowing down for PZ Cussons which in 2010 acquired leading sunless tanning brand St Tropez, and established PZ Wilmer, a joint venture with Wilmar International, building a palm oil refinery in Nigeria and establishing a food ingredients business.
The list of brands added to the PZ portfolio would grow between 2012 and 2015 to include Fudge hair care brand, Rafferty’s Garden- an Australian baby food brand, five:am organic yoghurt and TOP vinegar to add to its Food & Nutrition range under the Greek Minerva family brand.
PZ Cussons in the market place
PZ Cussons has been able to establish its brand to meet the basic daily need of the Nigerian consumer. The manufacturer has strategically developed product lines that include soaps, detergents, toiletries, feminine hygiene products, pharmaceuticals, cosmetics, packaging materials, refrigerators, freezers, and air conditioners to appeal to the quality and price requirement of households.
Brands like Mamador Oil, Yo, Nunu, Bliss, Coast, Minerva, Zip detergent, Radiant detergent, Morning Fresh wash, Venus and Joy luxury soaps, Carex, and the range of Haier Thermocool electricals (refrigerators, freezers, air conditioners, fans, air coolers, washing machines, water dispensers, water heaters, gas cookers and microwaves, among others) show a strong market presence of PZ Cussons Plc.
Performance still below pre-recession level
The company’s earnings figure post-recession is nowhere compared to pre-recession level. A snapshot of its 5-year financial performance revealed that although revenue trended northwards but grew at a very slow pace.
Revenue hits a 5-year high at N80.5 billion in the full year 2018 but dipped 12 percent in 2017, and 3 percent in 2018. Net income was at its lowest level in 5 years at N1.9 billion in 2018, compared with N3.7 billion in 2017, N2.1 billion in 2016, N4.6 billion in 2015 and N5.1 billion in 2014.
Operating margin of PZ Cussons Nigeria Plc stood at 10.21 percent in 2018, 6.71 percentage points lower than 16.90 percent reported in 2017.
This implies that the personal healthcare market was retained N102 from every thousand naira generated as revenue in 2018 after settling indirect expenses, compared with N169 in 2017, N47 in 2016, N91 in 2015 and N90 in 2014.
After meeting indirect expenses, tax and interest, PZ Cussons Nigeria kept N24 as profit in 2018, N47 in 2017, N31 in 2016, N63 in 2015 and N69 in 2014.
The assets have been expanding except for 2018 when it dipped some 2 percent to N88.6 billion, but the company was less efficient to utilize assets to generate earnings.
PZ Cussons Nigeria earned N21 in 2018 from every naira investment in assets, N41 in 2017, N29 in 2016, N68 in 2015 and N72 in 2016.
PZ Cussons cost efficient improved post-recession, with the cost of production accounting for 69 percent in turnover in 2018, compared with 64 percent in 2017, 72 percent in 2015 and 74 percent in 2014.
In nine months ended to February 2019, cost-of-sales ratio surged 77 percent as the firm expended more on marketing expenses to increase awareness of its retail-focused pack sizes across key brands, which pressurized earnings.
Investors’ sentiment towards the company’s stock is weak on the back of its unexciting earning numbers.
Shares of PZ Cussons have returned 34 percent losses year-to-date, underperforming the equity market (-0.4%) and consumer goods index (-15%).
Resilience, Commitment to Value addition amid headwinds
PZ Cussons Nigeria Plc is not enjoying its best days at present. Despite numerous headwinds ranging from tough operating conditions, consumers’ switch to unbranded products, stifled consumers’ disposable income, intense market competition and goods clearance challenges at the port, the company is not weary to continue adding value to consumers.
The company’s woes began in 2016 when the Nigerian economy contracted for the first time in 25 years. This saw the company’s bottom-line dipping some 53 percent in 2016 full year, and top-line down 5 percent.
Despite numerous headwinds, the personal healthcare goods maker has been consistent in paying dividends, delivering returns to shareholders for straight three decades, and elevating market share through promotional and value-adding activities.
Four months ago, news broke on the social media that PZ Cussons was considering pulling out from Nigeria due to tough business conditions. The company admitted it was going through a tough time, however refuted the news, stressing that Nigeria remains a key market for them.
“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. We are not leaving Nigeria.” said Christos Giannopoulous, Chief Executive Officer, PZ Cussons Nigeria Plc, at an interview commemorating the company’s 120th anniversary.
Speaking further, “We will continue to invest if we see the opportunities that exist in the future. Our sales at this moment give us valuable thing in terms of giving us the confidence to continue”
Israel Odubola & Segun Adams
