PZ Cussons reports 5% profits rise in Nigeria despite tough year

  • Consumer goods group eyes acquisitions to boost beauty ranges

PZ Cussons said it was on the hunt for beauty acquisitions to complement its Sanctuary spa and St Tropez tanning ranges, as it reported a 5 per cent increase in full year pre-tax profits. Brandon Leigh, finance director of the family-controlled company, said on Tuesday that it would seek “strong brands in the UK and Indonesia”, adding: “Acquisitions give you scale quite quickly — but we are not desperate to buy.”

The Manchester-based company can afford to spend — net debt was 1.1 times earnings before interest, tax, depreciation and amortisation at the year end on May 31.

Cosmetics and, to a lesser extent, skincare have defied the growth problem afflicting many consumer goods companies, with annual growth rates of more than 4 per cent, against 2-3 per cent for the broader sector including food companies. Personal care, PZ Cussons’ biggest division accounting for just over half group sales, was its fastest-growing business with a 4 per cent increase in sales to £431m in the year to May 31. Group revenues fell by 1.5 per cent to £809m.

Pre-tax profits of £88m were 5 per cent higher than the previous year but underlying profits — excluding exceptionals — were flat at £103.5m.  Mr Leigh said the group had had one of its toughest years in Nigeria — its single biggest market where it makes two-thirds of its sales and where it has been battling a halving in the value of the naira.

“The Nigerian consumer is under significant inflationary pressure with most of their staples purchases doubling in cost over the last year,” the company said. PZ Cussons has been reducing the size of its products in Nigeria to make them more affordable and said it had either held, or grown, market share in the areas in which it operates — which includes food, electricals and home care brands such as Canoe laundry products.

Revenues in Africa — of which Nigeria accounts for 90 per cent — fell by 15 per cent at current exchange rates but rose by 5 per at constant rates. Iain Simpson, analyst at Société Générale, noted that: “Despite a 50 per cent devaluation of the naira, PZ Cussons has been able to take sufficient pricing to offset imported input cost inflation.”

Operating profits fell in both Africa and Asia but rose slightly in Europe, the group’s most profitable region. In the UK, which accounts for 70 per cent of European sales, new launches of Imperial Leather and other bathing brands had been “robust”.

Mr Leigh said he expected the trend of “nervous consumers shopping wisely” to continue. This was reflected in the growing importance of bargain outlets, such as Home Bargains and Poundland.

Five years ago 90 per cent of the group’s products in the UK were sold through the four biggest supermarkets; that has fallen to 45 per cent today. “The main thing we can do is deliver innovation because the consumer will respond to new product launches,” said Mr Leigh.


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