PZ Cussons cautious over full year outlook due to volatile Nigeria market

Manchester-based consumer products group PZ Cussons said it expects consumers in all its markets to remain under pressure, in a trading update for the six months to November 30, today.

The group said its Europe and Asia markts have seen continued good performance as a result of product innovation and distribution expansion.

However, Africa trading remains challenging as a result of the economic situation in Nigeria.

Overall, the business said its balance sheet has strengthened further, with good cash flow management and net debt lower than at the end of the previous first half.

In Europe, the UK washing and bathing division saw a significant number of new product launches take place, supported by innovative marketing campaigns.

This has driven good growth across the key brands of Imperial Leather, Carex and Original Source, with increasing focus on trend-led products such as Imperial Leather ‘No Drama Llama’ Foamburst and Carex ‘Unicorn’ handwash.

In the beauty division, new product launches and further expansion of on and off-line distribution channels has driven growth across the portfolio of brands.

The group said articularly pleasing has been the strong growth of St Tropez in the United States, which now accounts for approximately 15% of the beauty division’s revenue.

Asia has seen good performance offset by the weakening of Asian currencies against sterling.

In Australia, performance was solid across all categories of personal care, home care and food and nutrition, with new product launches across all areas of the portfolio.

In Indonesia, Cussons Baby has continued to strengthen its number one position with launches to further expand the range, and Cussons Kids and Imperial Leather have also made good progress.

However, in Nigeria, consumer disposable income has remained weak ahead of the general election which is scheduled for February 2019.

There have also been cost challenges from a further 10% weakening of the naira against the US dollar in the period and additional transport costs from significant disruption being faced in clearing goods at the port.

This will result in a lower first half profit contribution than the same period in the prior year.

With prices, volumes and margins, therefore, continuing to remain under pressure, the business has been focusing on optimising price points and pack sizes across the key brands in the portfolio.

The Nutricima business, which was loss making last year, has moved towards a break even position, the group revealed.

Today’s statement said: “We expect trading conditions in Nigeria to remain subdued, and we are continuing to actively manage and review the Nigerian portfolio to ensure that we mitigate short term volatility and are best placed for when growth returns to the market.”

Looking ahead over the full year, the statement added: “We expect the consumer to remain under pressure in all of the markets in which we operate.

“Despite this, our unrelenting focus on continued product innovation and further expansion of our distribution are expected to underpin continuing good performance in Europe and Asia.

“The overall out-turn for the full year will, as in prior years, depend in part on the macro environment in Nigeria during the seasonally-important second half of the year, and we continue to manage that business accordingly.”