The insecurity in the North Eastern part of the country combined with intense competition on some of its products are slowing the growth of PZ Cussons plc, a Nigerian company operating in the fast moving consumable goods industry.
For the full year 2014 (end May), the company’s pre-tax profit fell by 9.15 percent to N6.95 billion from N7.65 billion the same period of the corresponding year Q4 2013, while sales increased by 2.19 percent to N72.90 billion.
Profit after tax slid by 4.48 percent to N5.08 billion or (116k) in Q4 2014, as against N5.32 billion or (123k) as of Q4 2013.
The Nigeria environment has been challenging for firms in the FMCG sector as distribution to the North Eastern part of the country are disrupted. Additionally, purchasing power of consumers is also eroded.
According to PZ Cussons UK (parent), the Nigeria subsidiary achieved tangible growth across the value segment with brands such as Premier, Zip, Morning fresh, Carex, and Cussons Baby.
However, revenues from the bulk detergents and laundry soaps category suffered due to increased competition.
Consumer names continue to be challenged by headwinds such as the escalating insecurity in Northern Nigeria and continued pressure on consumer wallets, according to Osadiaye Uwadiae, a research analyst with FBN Capital Limited, saying “insecurity concerns have now spread beyond the North East of the country into the Federal Capital Territory.
“In addition to this, increased competition across various segments appears to be posing additional challenges across board.”
Output in Nigeria’s palm oil sector is revving up as PZ Cussons announced last month that its joint venture (JV), palm-oil processing refinery with Singapore’s Wilmar International Ltd, 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.
Cost-of-sales margin were flattish down at 73 percent, operating expense margin increased to 17.68 percent in Q4 2014, from 16.78 percent as of Q4 2013.
Net margin, a measure of profitability and efficiency, declined to 6.85 percent in 2014, compared with 7.45 percent last year.
Gross margins in the review period were flattish as this could be attributed to the upward local prices for crude oil, which is key raw material to PZ. Finance costs were up by 60.03 percent to N367.32 million in 2014, compared with N229.53 million the preceding year.
Total assets were up slightly by 1.84 percent to N72.29 billion against N70.96 billion the preceding year. The return on average equity and the return on average assets were 6.98 percent and 11.24 percent, respectively.
The company share price closed at N37.30 – August 13, 2014, while market capitalisation was N148.09 billion. “In 2015, we expect intense competition and insecurity challenges to weigh on PZ’s performance,” said Uwadiae. 