PZ Cussons Nigeria’s full year profit for the period ended May 31, 2018 declined by 48 percent to N1.93 billion from N3.69 billion it realised in corresponding period in 2017. Analysts have however attributed this to a number of factors including high cost of sales, low inventory turnover, high unemployment rate with its attendant effects on disposable incomes of Nigerians.
Cost of sales during the period rose by 12 percent from N50.3 billion last year to N56.1 billion in the current period, which erased the 3 percent increase in revenue of N80.6 billion in FY 2018 as against N78.2 billion in FY 2017. Interest cost increased geometrically by 187 percent from N290.5 million in 2017 to N832.4 million in 2018. With higher cost of sales , PZ expended 70 kobo to produce a good in 2018 as against 64 kobo in 2017.
Raw materials, finished goods and engineering spare parts inventories fell by 9 percent. When the inventories are disaggregated, the most decline was recorded by finished goods and goods for resale inventories that fell by 29 percent during the period.
Supporting the fact that lower disposable incomes of Nigerians affected their consumption in the last one year, domestic sales recorded a marginal increase of 1 percent while export rose significantly by 45 percent.
“PZ is into two lines of businesses which are the branded consumer goods and durable electrical appliances. Due to fall in disposable incomes as a result of high unemployment rates in the country, the durable electrical appliances witnessed reduced patronage in the financial year that just ended”, Fola Abimbola, an analyst with CSL Stockbrokers said.
Sales of the branded consumer goods rose marginally by 7 percent from N54.8 billion in 2017 to N58.5 billion in 2018. On the other hand, the sale of the durable electrical appliances fell by 6 percent to N22.1 billion in contrast to N23.5 billion during the period.
However, both segments witnessed significant decrease in profit after tax. Profit after tax from the consumer goods business segment fell by 27 percent from N2.24 billion in 2017 to N1.63 billion in 2018. Similarly, PAT from the durable electrical appliances business segment fell by 80 percent from N1.45 billion last year to N296.6 million in 2018.
Unemployment rate in Africa’s biggest economy stands at about 18.8 percent with millions of Nigerians who are able and willing to work unable to find jobs. The high cost of capital and exchange rates have had untold hardship on Nigerian businesses in recent times.
