PZ Cussons delivers revenue growth for five consecutive quarters
PZ Cussons Nigeria Plc has now delivered top line growth for 5 consecutive quarters since the first quarter of 2017 as it found a winning formula for its product mix.
This means the soap maker has surmounted the headwinds caused by scarcity of foreign exchange, soaring inflation and a weak consumer demand as profit beats analysts’ estimates.
For the half year ended 30 November 2017, PZ Cussons recorded a profit after tax of N288.95 million as against a loss of N586.55 million it recorded in the corresponding period of 2016.
The N288.55 million profits beat the N195.16 billion estimates of 8 analysts surveyed by BusinessDay.
Driving the performance was higher sales and a reduction in foreign exchange losses.
Sales increased by 23.50 percent to N41.12 billion in the period under review, thanks to improved consumer spending.
Foreign exchange losses dipped by 47.90 percent to N2.57 billion as at half year ended November 2017 as against N4.93 billion the previous year.
The continued strengthening of the Naira against the Dollar since the central bank introduced the Investors’ and Exporters’ (I and E) Window mid-year and subsequent liberalization of the local currency ease the pains of consumer goods firms in Africa’s most populous nation.
2016 was horrendous for these firms as a sudden drop in price of oil and a severe dollar scarcity prevented them from importing raw material and equipments. Some of them were forced to buy foreign currencies at the inaccessible parallel market popularly known as black market.
Dollar denominated debt in the balance sheet of firms ballooned in the period as the country slipped into its first recession in 25 years.
However, a rebound in oil production and favorable foreign exchange policies saw the country exist a recession as GDP expanded by 0.52 percent and 1.4 percent in the first and second quarter the year.
PZ Cussons has a time coverage ratio of 7.74 times earnings, which means interest expense, is not a burden on operating income.
The consumer goods giant’s finance costs surged by 171.25 percent to N544.72 million in the period under review, as against N200.17 million the previous year.
Total trade and other payables were down by 13.38 percent to N34.15 billion in the period under review, which means PZ Cussons is reducing the backlog of dollar debt owed to suppliers.
“PZ’s Q2-18 result is impressive in our view. That said, we think market reaction would be neutral to negative, given that net profit trailed Q2- 17’s by 45%. The stock has accumulated 67% YtD, but has lost 19.30% QtD,” said analysts at Cordros Research Limited.
Further analysis of the financial statement of PZ Cussons financial statement shows cost of sales spiked by 31.90 percent to N28.79 billion as the company continues to grapple with imported inflation.
Cost of sales ratios moved to 70.01 percent in the period under review as against 66.15 percent the previous year.
In other words the consumer goods giant is spending more input cost to produce each unit of products.
PZ Cussons shares closed at N20.60 as of 2:00 pm on Friday 2017, valuing it at N81.79 billion. It is trading at 0.933x sales while the shares have gained 45 percent the corresponding period of last year.
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