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PZ Cussons slides as profits barely within forecast following Nigerian market contraction

The soaps and cosmetics maker reported an adjusted pre-tax profit for the year of £80.1mln, down from £102mln the year before and barely within its forecasts of £80mln-£85mln
Imperial Leather soap
The firm said cost inflation and low wage growth had driven the Nigerian market shrinkage

PZ Cussons PLC (LON:PZC) has reported a drop in adjusted pre-tax profits for the full year that barely scraped inside its forecasts as its Nigerian market suffered a sharp contraction.

The FTSE 250 soaps and cosmetics maker reported an adjusted pre-tax profit for the year of £80.1mln, down from £102mln the year before while revenues fell to £762.6mln from £809.2mln previously.

READ: PZ Cussons shares fall as it says full-year profit will be at the lower end of expectations

The drop-off in profits was barely inside the range that the company had predicted in a trading update last month when it expected adjusted pre-tax profits for the year to be at the lower end of between £80mln-£85mln.

The fall in profits was driven primarily by a contraction in the group’s African division, more specifically in Nigeria where significant cost inflation and low wage growth had resulted in “extremely challenging trading conditions” and had caused the market to shrink and adjusted operating profits to fall 77.7% to £6.3mln.

In its Asian and European divisions, the group fared better, with adjusted operating profits growing by 17% to £18.6mln and 0.3% to £60.8mln respectively.

The firm also maintained its final dividend for the year at 5.61p, the same as the previous year.

Challenging conditions

In its outlook, the company said it expected macro conditions to remain challenging in most of the markets it operates in, with elections in both Nigeria and Indonesia in the second half of the new financial year. Commodity costs and exchange rates were also expected to remain volatile.

Chair of PZ Cussons, Caroline Silver, said that the sharp decline in African profits had resulted in a “disappointing result for the group as a whole”, and highlighted that while there had been no structural change in Nigeria, “a sustained lack of liquidity at both consumer and trade level has resulted in a significant contraction in the size of the market, resulting in lower volumes, prices and margins”.

She added that the firm was unaware of any indicators that the liquidity situation would improve in the country, and as such was “taking steps to optimise further [its] overall product portfolio and to reduce [its] cost base”.

In late-morning trading, PZ Cussons shares were down 2.7% at 211.8p.

--Adjusts figures to adjusted pre-tax profits and adds share price--

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