PZ Cussons, producer of Imperial Leather soap, brushed off concerns about trading in Nigeria, its biggest market, saying on Thursday that full-year profits would be in line with market expectations.
The update by the Manchester-based group indicated that trading in Nigeria had improved in the second half of its financial year, which ended on May 31.
Nigeria, where PZ Cussons has been present since 1899, accounts for 40 per cent of sales. The group’s first-half profits had been hit by a weakening of the local currency and political unrest, including a fundamentalist Islamist insurgency in the north.
However, the company that also makes St Tropez self-tanning products modeled by Kate Moss, warned of a potential hit to the spending power of Nigerian consumers from imported inflation. “Whilst the naira is currently stable, there remains a risk of further currency devaluation,” it said.
Profit margins on personal care items in Nigeria suffered but sales increased, driven by the launch of new products such as a shower gel version of Premier, the country’s biggest-selling soap.
Meanwhile the electrical home appliances business in Nigeria had a “strong year.”
Darren Shirley, analyst at Shore Capital, said PZ Cussons had “surprised us . . . by confirming that full-year trading may have been in line with expectations; the surprise comes as we fully expected the Nigerian fuel strike to have materially impacted trading at the end of the year.”
Analysts held expectations of underlying full year pre-tax profits of £109m, which is flat on last year in constant currency terms.
Jonathan Leinster, analyst at Panmure Gordon, said the group’s 2016 financial year was likely to be tough because of the risk of currency devaluation in Nigeria.
“We believe full year 2016 will be another year without sterling earnings growth and that consensus estimates for 2016-2017 are too optimistic,” he said.
FT
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