PZ Cussons 2Q 2016 earnings boost hedge PBT/PAT losses

The second quarter unaudited result of PZ Cussons Nigeria Plc recently released by the Nigerian Stock Exchange which showed growth in earnings has generated mixed feelings

The result for the period ended November 30th, 2016 showed that Profit before Tax (PBT) and Profit after Tax (PAT) grew by 231 percent over a year’s period and 260 percent year on year to N2billion and N1billion respectively.

The result which analysts said came as a positive surprise, recorded profit before tax of N2 billion which hedged the adverse impact of -N2.4billion loss in made in Q1 2016.

According to the result, sales rose for a second consecutive quarter, by 5.6 per cent y/y to N16.5bilion while price increases helped top line growth.

The bottom line growth was mainly as a result of gross margin expansion of 758bps to 34.4 per cent. Operating expenses during the period rose marginally by 1.0 per cent supported by efficiency gains from the company’s new SAP system.

While tax expense increased by 179 per cent y/y to N709millio, PAT still grew by 259.7 percent to N1.1billion.

Foreign exchange loss for the quarter recorded by PZ Cussons dropped by 95 per cent to –N237million, from the N4.7bn foreign exchange (FX) loss recorded in the preceding quarter.

Fx liquidity in Nigeria remained poor over the Q2 2017 period as the exchange rate continued to weaken on both the interbank and parallel markets. As such, the naira depreciated further to around N310/US$ (interbank). Trade payables amounting to N41.5bn during the quarter increased by 61.5%.

The company also recorded an increase in loss before tax of N425.2 million from a profit of N1.2 billion recorded in the same period of the prior year while Earnings per Share for the period under review stood at -7 kobo having declined by 135 percent from 2015’s 20k.

Meanwhile, commenting on the results, the company said “Our first half results was impacted by adverse movement in foreign Exchange rate amounting to a loss of N4.9 billion in 2017, against a loss of N1.4 million same period prior year”

PZ Cussons shares last traded at N14.25 per share. The company shares are listed under the consumer goods sector of the NSE with market capitalization of N56.6 billion and N3.97 billion shares outstanding