In spite of the tough operating environment, increasing competition and security challenges in the north, PZ Cussons Nigeria Plc, through focus strategy and market penetration, recorded a strong performance by posting a profit after tax of N4.57 billion.
The results means the consumer goods firm is tapping into the Nigeria’s huge population and rising middle class that crave for consumption.
It also means investors will be attracted to the company’s shares given its continued growth at the bottom lines.
PZ Cussons May 2015 audited financial statement showed top line growth by 0.3 percent to N73.1 billion from N72.90 billion despite harsh economic conditions stunting the growth of Fast Moving Consumable Goods (FMCG) firms.
FMCG firms in Africa largest economy have been dealt a blow as the devaluation of the currency has spiralled price of raw materials culminating in huge production costs since these firms import 55 percent of their raw materials.
Also crimping growth of firms is rising inflation that pressured consumer wallets thus weakening the demand for PZ Cussons products.
The Central Bank has twice devalue the naira to fend off the impact of a 50 percent drop in the price of oil, that has hit foreign reserves and culminated in dwindling government revenue.
The naira was little changed after the central bank kept its key interest rate at a record high 13 percent, trading at 199.05 per dollar at 3:21 p.m.in Lagos, Nigeria’s commercial hub.
PZ Cussons was hit by the devaluations as a significant exchange rate losses caused profit before tax to fall by 5.7 percent to N6.55 billion in the period under review as against N6.95 in last year.
Gross margins fell to 28 percent in 2015 compared with 37 percent last year. Gross profits were down by reduced by 22 percent to N20.45 billion.
Cost of sales margin was 72 percent, which means the consumer goods firm spent 72 percent on input costs to produce each unit of product. Operating expenses increased by 7 percent to N13.80 billion in 2015 from N12.89 billion last year. Operating margin remained flattish at 9 percent.
PZ Cussons is giving back to owners of the business as its board recommended final dividends of N2.4 billion, representing a payment of 61 kobo per share.
The N2.4 billion dividends translate to 52.51 percent payout ratio which signifies an aggressive dividend policy. Dividend gross yield was 2.33 percent, according to Bloomberg data.
The company’s balance sheet remains strong and ungeared as to total assets remained at N67 billion. Return on equity (ROE) fell to 10 percent in 2015 from 12 percent the previous year. Return on assets (ROA) remained flattish at 7 percent.
Earnings per share EPS reduced by 12 percent to 102k in the period under review from 116k in 2014.
PZ Cussons share price closed at N27.20 on the floor of the exchange while market capitalization was N104.02 billion.
source: Businessday Nigeria
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