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PZ Cussons’ pretax profit dropped by 23% as inflation in Nigeria caused sales to fall

The company's operating profit dropped by 77.7% in Africa, its largest market region.

  • PZ Cussons' annual pre-tax profit dropped by 23% as a result of high inflation in Nigeria.
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The consumer goods company and maker of Imperial Leather soap, Carex, Venus among others in Nigeria said it expected the current financial year to remain challenging as consumers' spendings slid profit in Africa - its biggest market region - by 78%.

According to the financial statement posted on Tuesday, July 24, 2018, profit in Europe was little changed at £60.8m as households in the UK spent less on Cussons' washing and bathing products. In Asia, profit rose 17% to £18.6m.

Tough macroeconomic conditions in Africa's largest economy, Nigeria, has continued to affect manufacturers and business owners as a result of high-interest rate, double-digit inflation, fluctuating and multiple foreign exchange regime even as the country continues to stabilise market conditions after emerging from worst economic recession in 2017.

Caroline Silver, PZ Cussons Chairperson, in a statement to Reuters said, "Macro-conditions in Nigeria has resulted in a sharp decline in Africa profits for the year and hence a disappointing result for the Group as a whole."

The result posted a cautious outlook for the company and lower than its forecast of £80 million to £85 million on slowing sales in Nigeria - its largest market - and the UK.

PZ Cussons' annual financial results for the year ended May 31, 2018

- Operating profit from its African market, which made up 36.1% of the total revenue in the year ended May 31, 2018, slid 77.7%

- Operating profit in the UK edged higher only marginally.

- Annual pretax profit fell 23% to £66.6 million

- Revenue fell 5.8% to £762.6 million.

The company also reported a 21.5% drop in adjusted pretax profit to £80.1 million.

How Nigeria market affects PZ Cussons' full year financial result

The company said last month sales in Nigeria had not picked up during the peak selling season in the country, hitting volumes, prices and margins across most areas of its portfolio in the country.

PZ Cussons also said then that liquidity had not flowed into Nigeria's economy, despite higher oil prices contributing to increased foreign exchange reserves and a relatively stable exchange rate in Nigeria.

Last year, PZ Cussons Nigeria reported a pre-tax profit of N4.81 billion last year and one of the lowest in the last 5 years.

PZ Cussons next steps in Nigerian market

The company said in the absence of an indication as to when liquidity in Nigeria may improve ahead of the February 2019 general elections, it is taking steps to optimise its overall product portfolio and to reduce cost base.

Silver, however, said there will be no structural change in the landscape of the categories in which PZ Cussons operate in Nigeria.

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