From the sixties to the mid-nineties, a lot of families were addicted to the array of products manufactured and produced by PZ Cussons Nigeria Plc.
Brick and mortar shops were awash with Imperial leather soap (a premium brand), and shoppers swooped on it like a swarm of bees. The detergent is multipurpose, as household use it to bath and launder clothes.
PZ Cussons’ flagship brands were advertised on the pages of every Nigerian Newspaper and Television Soap Opera, as it was a poster child of the industry.
However, the glory days of the company that produce electrical, homecare, personal care and beauty are over, as a weak macroeconomic environment and stiff competitions are undermining earnings.
In 2016, the Nigerian consumer goods giant had earnings beaten down due to lack of availability of the U.S dollar, as a severe currency shortage, brought on by a sharp in the crude oil price of mid-2014, tipped the country in its first recession that year.
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Last year, PZ Cussons Group UK – the parent company of PZ Cussons Nigeria Plc (PZ), had blamed disappointing results on its Africa operations, especially Nigeria.
The parent company debunked rumours that it planned to exit a market it’s been operating in for 120 years. In 1899, George Zochonis and George Paterson, founders of PZ Cussons Group of Companies, opened their first factory in the country.
For the third quarter ended 31 August 2019, PZ Cusson’s revenue dipped by 0.56 per cent to N15.80 billion. Between 2018-17 financial period, its top lines (sales) declined by 15.88 per cent to N15.89 billion, but it was up by 12.77 per cent to N18.89 billion in 2017-16 periods.
The slump in revenue can be largely attributed to weakness in the Home and Personal Care (HPC) Segment as it continues to wrangle with increasing competition from cheaper unbranded products as well as products from unrecognized smaller players which continues to exert pressure on HPC business.
As a result of weak sales and the rising cost of production, the company has been recording recurring losses and deteriorating profit margins, which is why it has not been able to deliver a higher return on shareholders’ returns.
Gross profit has reduced by 67.15 per cent to N2.71 billion in the third quarter ended August 31 2019; it dipped by 32.45 per cent to N4.53 billion in 2018-17 financial period, declined by 83.13 per cent in 2017-16.
It recorded losses of N1.13 billion in 2019, and N2.66 billion in 2018, N1.23 billion in 2017, N1.58 billion in 2016, but it recorded a profit of N377.16 million in 2015, and N555.45 million.
PZ Cussons operates in an environment where consumers have refused their pulse spring as inflation and fuel hikes have eroded their purchasing power.
The unemployment rate now stands at 23 per cent, one of the highest in the world, as over 50 per cent of a population of $1.98 a day. The country overtook India as the poverty capital of the world.
Nigeria’s inflation rate rose to a 17-month high in October as food prices surged.
Consumer prices rose 11.6 per cent from a year earlier compared with 11.2 per cent in September, the Abuja-based National Bureau of Statistics said in a recent report.
While the economy expanded to 2.28 per cent in the third quarter of (Q3) 2019 from 2.12 per cent in the second quarter, trade, recorded its second consecutive contraction, down by 1.5 per cent.
That validates the pains of consumer goods firms as partial closure of borders and lack of economic stimulus compounds their woes.
Investors have dumped the shares of the PZ Cussons Nigeria, which coincided with a stock market rout, as lack of policy direction on the part of the Muhammadu Buhari led administration has continually undermined foreign direct investment.
Pz Cussons’ share price, which peaked at N31 in June 2015, has dropped more than six times to close at N5.25 as of 2:00 pm Tuesday in Lagos. Its shares trade at 88.98 times earnings.