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Nigeria's woes strike PZ Cussons

RESULTS: Soap-maker PZ Cussons has seen growth in Poland, the UK and Indonesia offset by tough conditions in Nigeria - its largest market
January 29, 2013

PZ Cussons' (PZC) half-year performance wasn't quite as flat as the headline figures suggest. In constant currency terms, the soap-maker's revenue rose 2.7 per cent, driven by sales growth in the UK, Poland and Indonesia, with group operating profit up 15 per cent on that basis. But PZ Cussons is facing significant headwinds, especially in Africa.

IC TIP: Sell at 387p

It's the Nigerian business that's the worry. Nigeria generates around 90 per cent of African revenues and sales in the country fell - reflecting social unrest, flooding and the impact of lower fuel subsidies on consumer incomes. Accordingly, African revenue fell 3.6 per cent year on year to £156.9m, with profits down 5.1 per cent to £13m. Trading in Australia is tough, too, although that business did return to profit after self-help measures, including the closure of a production facility. Accordingly, the Asian unit saw sales rise 5.5 per cent to £81m, with profits up from £2.1m to £7.9m. In the European business, meanwhile, the UK operation made robust progress - despite high levels of promotional activity. However, partly reflecting such headwinds as weakness in Greece, European sales rose just 1.4 per cent overall to £176.9m, with profits largely flat at £24.4m.

Without further changes to Nigerian fuel subsidies, broker Panmure Gordon has upped its full-year EPS estimate from 16.3p to 16.6p (14.7p in 2012).

PZ CUSSONS (PZC)
ORD PRICE:388pMARKET VALUE:£1.66bn
TOUCH:385-388p12-MONTH HIGH:400pLOW: 294p
DIVIDEND YIELD:1.8%PE RATIO:48
NET ASSET VALUE:106p*NET DEBT:11%

Half-year to 30 NovTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
201141439.36.332.23
201241540.66.422.35
% change-+3+1+5

Ex-div: 20 Feb

Payment: 8 Apr

*Includes intangible assets of £248.4m, or 58p a share