PZ Cussons Nigeria Plc has weathered the storm of economic headwinds as full year profit surged amid rising foreign exchange losses.
The Nigerian consumer goods giant attributes the solid growth at the bottom line (profit) to improved revenue and its ability to control operating expenses.
For the year ended May 2017, PZ Cussons’ net income surged by 73.56 percent to N3.68 billion from N2.12 billion the previous year.
Sales increased by 14.54 percent to N79.60 billion, a result that was achieved on the back of initiative the company’s key brands and the improved capabilities in the supply chain.
The family healthcare business rose by 22 percent, thanks to strategic initiatives undertaken in the focus brands, the stream lined portfolio, and the consolidated and supply route to market.
“Overall, your company has done well in growing the top and bottom line under tough economic conditions,” said Kolawole Jamodu, chairman of the company.
PZ Cussons recorded margin expansion in the period under review as it remained focus on its strategic initiatives, aimed at driving shareholders value and sustaining long term growth.
Net margins, a measure of efficiency, increased to 4.63 percent for the year (ended) March 2017, as against 3.04 percent the previous year.
Operating profit otherwise known as Earnings before interest and tax (EBIT) margins moved by 16.58 percent to 8.81 percent in for the year (ended) May 2017 compared to 8.86 percent the previous year.
Gross margins increased to 35.08 percent in the period under review as against 29.05 percent as at June 2016. Gross profit grew by 38.31 percent to N27.94 billion despite rising cost of production.
While PZ Cussons recorded strong growth in sales and profit in the period under review, the company is grappling with rising production cost and spiraling foreign exchange losses caused by the sudden devaluation of the currency and scarcity of foreign exchange to import raw materials and equipment.
“Challenges in accessing foreign exchange during June 2016 to January 2017 restricted importation of importation of critical raw materials, said Jamodu.
“On the other hand depreciation of the naira pushed up the cost of goods, which led to price adjustment. This situation dented consumer confidence across all sectors. The impact was that sales volume dropped while operating expenses increased,” added Jamodu.
PZ Cussons’ foreign exchange losses surged by 205.20 percent to N8.79 billion in the period under review from N2.92 billion the previous year. This can be attributed to foreign payables among its current liabilities.
Total trade and other payables increased by 54.41 percent to N39.70 billion in the period under review while total liabilities rose by 44.87 percent to N44.95 billion.
PZ Cussons’s cost of sales increased by 4.67 percent to N51.68 billion in the period under review, lower than the 16.01 percent July inflation figure. Total operating expenses were up slightly by 4.67 percent to N14 billion.
Analysts say the introduction of the investors’ and exporters’ window by the central bank in April 2017 and the subsequent liberalization of the foreign exchange market is responsible for the single growth in cost of sales as most firms were able to source foreign currency to import raw materials.
The boards of director of the company have approved the payment of a dividend of N0.50 that translates to a dividend yield of 2 percent.
PZ Cussons’ shares have gained 78.90 percent since the start of the year while total market capitalization stood at N103.95 billion. The company shares close at N25.94 as of close of trading on Friday.
BALA AUGIE
