CardinalStone Research: PZ Cussons Nigeria Plc. H1'17/18 results - Lower FX losses uplift earnings

                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                14 December 2017

Good evening,

PZ Cussons Nigeria Plc. (PZ) H1'17/18 result - Turnover rose by 23.5% YoY to N41.1 billion, ahead of our estimate of N36.5 billion (+12.5% deviation). The company also reported a profit after tax of N589 million, behind our estimate of N1.4 billion (+56.9% deviation).

Other highlights:

·         H1'17/18 revenue grew by 23.5% YoY to N41.1 billion supported by price increases especially in the Home and Personal care segments which are the major contributors to revenue. On a quarterly basis, revenue grew by 17.6% QoQ.

·         We notice increasing cost pressure on gross margin, as Q2'17/18 cost of sales to revenue ratio climbed 589bps to 71.53% YoY and 328bps to 71.5% QoQ. Consequently, gross margin moderated to 28.5% in Q2'17/18 from 34.4% in Q2'16/17.  

·         Finance charges declined by 50% QoQ to N1.2 billion partly due to lower reported FX losses (Q2'17/18: N779 million; Q1'17/18: N1.8 billion) on its foreign currency payables.

·         Cost of sales pressure filtered into operating margin which contracted during the period (Q2'17/18: 8.9%; Q2'16/17: 12.9%). This was despite marginal improvement in operating expense management observed in declining operating expense to sales ratio (-190bps YoY and -210 bps QoQ ).

·         Notwithstanding, the company returned to profitability reporting a PAT of N712 million in Q2'17/18  compared to a loss after tax of N123 million in Q1'17/18, thanks to lower FX losses.

*Net finance cost includes exchange losses

The quarterly breakdown of PZ's result is shown below;

Kindly click here for a copy of PZ Cussons Nigeria Plc H1'17/18 results.

Our target price is under review

Regards,

Jerry Nnebue

Research Analyst, Consumer Goods
CardinalStone Partners Ltd

Analyst Certification

As to each security or issuer mentioned in this report, the respective primary research analyst(s) covering that security or issuer hereby certify that their views about the issuers and their securities discussed in this report are accurately expressed and that they have not received and will not receive direct or indirect compensation in exchange for expressing specific recommendations or views in this report.

Click here  to unsubscribe from this research publication 

  CardinalStone Research

  Tel: +234(1) 7100433, 7100434

  Email: research@cardinal-stone.com

  Website:www.cardinal-stone.com

SafeUnsubscribeâ„¢ uwaagbonile@infowarelimited.com

About our service provider

Sent by research@cardinalstone.com