PZ Cussons Nigeria Plc Q3 2019 – Lower Sales, Sticky Cost, Poor Earnings


The intense cross product competition in the home and personal care (HPC) segment further exerted pressure on PZ Cussons’ operation over its FQ3 191 financial year (to recall, the company’s financial year runs from June to May) results released after the close of market yesterday. The company reported loss after tax of N414.2 million following higher than expected decline in sales (-9.6% YoY to N20 billion), sticky production cost (-0.1% YoY to N16.2 billion) and higher operating expenses (+3.7% YoY to N4.2 billion). The decline in sales was steeper, relative to our expectation of a mild decline (-0.6% YoY) as the second half happens to be its peak season. That said, reflecting the loss in FQ3 19, PZ’s 9M 19 earnings printed at N807.1 million with EPS for the period declining 39.6% YoY to N0.20.

The parent company in its half year trading update, guided that the Nigeria business will increase focus on optimizing its price points and pack sizes across the key brands and product portfolio, in a bid to leverage the retail end of the market to drive volumes. For us, we believe the persistent competition in the market supported by a favorable FX environment continued to place pressure on the company’s selling price and volumes. To add, while we do not rule out the impact of depressed consumer wallet on sales, we believe the change in consumer taste and preferences in the HPC segment, has also played a major role in worsening the company’s sales. For context, while its flagship product “imperial leather” and few new products recorded a decent performance in the European and