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PZ records 31% decline in PBT, PAT in first quarter

By on October 11, 2014

PZ Cussons Nigeria (PZ) Plc Thursday  announced its first quarter results, which showed that while sales of N15.0 billion were flattish y/y, both profit before tax (PBT) and profit after tax (PAT) declined both by 31 per cent y/y to N872 million and N555 million respectively.
This subdued performance followed the trend set in the previous quarter, when the company’s PBT declined by over 50 per cent y/y.
Analysts however believe that a 9 per cent y/y rise in operating expenses (opex) to N3.2 billion more than offset a 52bps y/y gross margin expansion.
Analysts at FBN Capital commented: “We suspect crude palm oil (CPO, a key raw material for PZ) prices, which have declined by 16 per cent since June are primarily responsible for the expansion in gross margin. However we await management comments to shed more light on this point. These numbers do not come as a surprise as PZ Cussons UK (parent) had guided to subdued numbers in its interim management statement published on September 22, 2014.
“Although PZ is seeing meaningful growth in the south of the country, particularly in the electrical goods business and in food segment joint ventures, the insecurity in the north has continued to hamper sales growth. Sequentially, sales were down 26 per cent q/q while PBT and PAT declined by 51 per cent q/q and 48 per cent q/q respectively. We attribute the trend to seasonality effects as Q4 is typically the strongest earnings quarter for PZ.”
The analysts added: “Compared with our unrevised estimates there were no major surprises. While sales were in line with our forecast, PBT and PAT missed by 14 per cent and 4 per cent respectively. The insecurity in the north of Nigeria has been weighing on PZ’s growth for a while and we are now convinced that pressure faced by competition also reflects on PZ’s numbers. Compared with consensus, on an annualised basis, PZ Plc’s first quarter PBT of N872 million tracks well behind the consensus PBT estimate of N8.8bn.

 

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