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Naira volatility, insecurity continue to stunt PZ Cussons growth

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The squeeze in consumer wallets combined with the volatility in currency and the security challenges in the North of the country have continued to stunt the growth of PZ Cussons Nigeria plc, analysis of the financial statement shows.

This is evident as the company’s November 30, 2014 results showed that profit after tax fell by 37.82 percent to N1.44 billion from N2.31 billion in the preceding year, while sales dropped by 2.47 percent to N31.66 billion.

Analysts say the insecurity in the North has crimped sales as the company is unable to push its products to the region. They also say further that the volatility of the naira, caused by the devaluation, could be driving costs as some raw materials used by the company for the purpose of production are imported.

The pressure on disposable income of consumers is also identified as stunting the topline performance of the company.

The Central Bank of Nigeria devalued the naira by 8 percent to N168 from N155, to shore off the effects of the slump in oil price caused by increased US shale production.

The naira closed Friday at N189.10/ as against N187.30/$ traded the previous day at the interbank market, according to data obtained from Financial Derivative Dealers Quotation.

Consequently, PZ Cussons’ cost of sales ratio was as high as 72.86 percent, which means N0.72 was spent to generate N1 in sales.

Cost of sales increased by 1.86 percent to N23.07 billion from N23.51 billion last year.

While operating expenses reduced by 8.11 percent, the company’s operating margin ratio moved to 21.04 percent in 2014, against 18.80 percent in 2013, which means PZ Cussons is spending more on operating expenses to generate sales.

Net profit, a measure of profitability and efficiency, dropped to 4.54 percent in the review period from 7.1 percent last year.

Gross profit was down by 4.1 percent to N8.59 billion compared with N8.95 billion the preceding year, as direct costs attributable to projects continues to surge.

Total assets reduced by 2.90 percent to 68.91 percent compared with 70.96 percent the preceding year.

Return on equity (ROE) reduced to 3.46 percent in 2014, from 5.43 percent last year, while earnings per share (EPS) fell by 37.88 percent to 36k as against 58k last year.

The future is auspicious for PZ as it aggressively expanding with a view to tapping into the Nigeria robust economy.

The company in 2014 announced its joint venture palm-oil processing refinery with Singapore’s Wilmar International Limited, which it said was operating at near full capacity.

It expects the venture to gross at least $300 million (N48.3bn) annually within three years after construction, PZ said.

The company’s share price closed at N27.01 on the exchange, while market capitalisation was N109.18 billion.

BALA AUGIE