PZ Cussons says losses in Nigeria exaggerated

PZ Cussons has reacted to Questor’s caution to investors, which urged them to avoid shares of the conglomerate stemming from losses in Nigeria.   

According to the UK maker of Imperial Leather soap, the violence affecting parts of Nigeria is causing only limited disruption to business in what is one of the company’s most important countries.

Most of PZ’s Nigerian factories are located in the south, while the conflict that has left thousands dead is mostly confined to the north east of the African nation, according to Chief Financial Officer Brandon Leigh.

“It does impact business, but it doesn’t impact all of the business,” Leigh said by phone from London Tuesday after the company reported a drop in first-half sales and profit

About 30 per cent of PZ’s sales and a quarter of profit comes from Nigeria, where at least 65 people were killed in an attack Sunday by Islamist militants on Maiduguri, the capital of the northeastern state of Borno. Next month’s presidential election in the country will be a “key contributing factor” to full-year results, Chairman Richard Harvey said in a statement.
“Post the election there tends to be a rebound in confidence,” Leigh said. “We expect by the end of February to have business as usual.”
PZ Cussons rose 3.6 per cent to 322.1 pence in London trading. The stock has fallen 14 per cent in the past year.
Adjusted operating profit fell 4.4 per cent to £46 million in the six months ended 30 November as revenue slid 10 per cent to £386.7 million. The performance reflected divestments, without which operating profit increased 3.5 per cent and sales 1.5 per cent, the company said.
Growth in Europe and Asia compensated for reduced sales and profitability in Nigeria caused by “difficult trading conditions, disruption in the north and the devaluation of the Naira,” PZ Cussons said.
The company reported a “solid performance in light of the difficult trading conditions in Nigeria,” Canaccord analysts said in a note. The Nigerian presidential elections “will be a key factor for the company’s financial performance.”
The company has a strong balance sheet and an appetite for investment opportunities, Leigh said. It will look for “niche brands and personal care in the food and nutrition space,” he said. “There’s scope for further acquisitions, but we’re also quite choosy in what we buy.”