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PZ Cussons Says Profit Rises, But Nigeria Still A Concern


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PZ Cussons

PZ Cussons Plc, the maker of Imperial Leather soaps, said it expected to report a higher first-half profit, but was concerned about business in its key Nigerian market.

The British soap and shampoo maker said profit was likely to be about 10 percent higher, driven by an improvement in the profitability of its Australian business and a strong performance in the United Kingdom.

Revenue during the six months to Nov. 30 was broadly flat due to difficult trading conditions in its key Nigerian market.

The company said continued social unrest in the north, severe floods and the removal of a fuel subsidy earlier this year impacted sales in Nigeria. However, it said margins had improved, helped by lower raw material costs.

Nigeria, Africa's most populous country, has been rocked by unrelenting violent religious clashes and the removal of an $8 billion fuel subsidy in January that led to an eight-day national strike.

"We would not expect market forecasts to change, but note that results of PZ Cussons are H2 (second half) loaded, and Nigeria remains a risk factor," Numis Securities analyst Charles Pick said in a note to clients and cut his rating on the stock to "reduce" from "hold".

PZ Cussons, which specialises in home-care, personal care and beauty care products, gets about 40 percent of its revenue from Africa.

"The outlook still remains clouded by uncertainty in Nigeria relating to ongoing unrest in the north and potential changes to fuel subsidies in the new year," Panmure Gordon analyst Damian McNeela said.

However, McNeela added that the company was starting to see benefits of lower raw material costs and its supply chain optimisation efforts, and raised his price target on the stock to 335 pence from 315 pence.

Core brands such as Imperial Leather, Carex and Original Source had performed well in the UK in the first half, the company said.

PZ Cussons said that it had taken measures to improve the performance of its Australian business. However, trading conditions in Australia remained challenging.

The company had said in July that retailers in Australia had devoted greater shelf space to private labels, hurting PZ Cussons' volumes and margins in the home-care business.

The company is expected to announce half-year results on Jan. 29, 2013.

Shares in the company were trading down slightly at 358.4 pence at 0930 GMT on the London Stock Exchange.


2012-12-06 02:04:48.0

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