PZ Cussons Nigeria Plc has surmounted the obstacle of scarcity of foreign-exchange, soaring inflation and weaker consumer demand as the soap maker recorded its best results in several indices.
Analysts attribute the stellar performance of the company amid a stiff for competition for its major product to foreign exchange liquidity and focus and market penetration strategy.
For the quarter ended February 2017, PZ Cussons’ earnings before interest and tax (EBIT) surged by 190.40 percent to N19.22 billion from N13.68 billion the previous year.
Sales were up 12.83 percent to N57.15 billion on the back of an aggressive marketing and advertising strategy.
The market reacted positively the results as the company’s share price gained 4.29 percent to close at N14.60 as of 2pm Monday, valuing the company at N52.80 billion.
The results indicate that PZ is on a recovery path, following some improvement in fx liquidity, according to Uwadiae Osadiaye, equity research analyst with FBNQuest in an emailed note to BusinesDay.
“Strategies introduced by the company to improve topline seem to be paying off, coupled with the impact of increased sales due to seasonality,” said Osadiaye.
PZ Cussons and other consumer goods firms have been struggling with a severe dollar scarcity that hindered them from importing raw material and machinery.
The central bank allowed the naira float a little by adopting a flexible foreign exhnage regime that saw the naira lose 40 percent of its value against the U.S currency.
PZ Cussons felt the pinch of the aforementioned devaluation of the naira as it incurred foreign exchange loss of N6.1 billion however it was able to record a net income of N1.60 billion.
Consumer goods firms in Africa’s largest economy went through a lot of stumbling blocks as rising inflation eroded the purchasing power of consumers.
Inflation for the month of February accelerated to 17.78 percent, the highest in 15 months. The economy contracted by 1.50 percent in the fourth quarter of the 2016, according to the National Bureau of Statistics (NBS).
Despite all the challenges, PZ Cussons’ EBIT margins increased to 14 percent in February 2017 from 6 percent last year. Gross margins moved to 34 percent in the period under review from 27 percent the previous year.
PZ uses palm oil as its source of raw materials.Other key inputs are Alkyl, Benzene (LAB) and Tuller which are used in the manufacture of soaps, detergent and dish washing soap.
Analysts say the Nigerian consumer goods firm may face stiff completion on its premium product Morning Fresh from cheaper products such as MaMa Lemon and other cheap brand.
“Competition remains stiff in HPC as consumers have more alternatives. Case in point is an increasing presence of unbranded dishwashing liquids priced six times cheaper than PZ’s Morning Fresh,” said analysts at CSL Limited in a recent mail to BusinessDay .
BALA AUGIE
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