PZ Cussons Q1 2018 Results: Initial Impression

October 4, 2017/InvestmentOne Research

Q1 2018 results highlight: 

·         Revenue of N18.89bn; up +12.8% y/y  

·         Loss before tax of N181mn vs N2.4bn loss in Q1 2017  

·         Loss after tax of N123.1mn vs N1.59 loss in Q1 2017  

PZ Cussons yesterday released its Q1 2018 results (end-August) which showed a loss after tax on input and operating cost pressure. While revenue of c.N18.9bn was up 12.8% y/y; a combination of c.400bps contraction in gross profit margin (versus average of 35.1% in the last three quarters) and over 500bps expansion in opex/sales to 21.9% (compared to average of 16% in the last three quarters) saw operating profit margin close the quarter at 8.5%; which is c.1000 bps weaker than the average 19.7% achieved in the last two quarters. As such operating profit came in at N1.6bn, down -29% y/y and -68.7% q/q.

Consequently, the company close the quarter with a N181m loss after tax. We note the impact of c.N1.79bn in FX related loss on the performance. This must have been the result of exchange rate movement on the company’s forward contract on some of its transactions.

We highlight similar performance trend in the fiscal year 2017, which saw the company close Q1 2017 in a loss position. However, performance turned positive over the remaining quarters to deliver a full year profit after tax. We await clarity on the company’s call.

Our models are under review. We rate PZ shares SELL. 

PZ Cussons Q1 2018 (N’ millions)

YE: May

Q1 2017

Q1 2018

Y/Y

Sales

16,753

18,899

12.8%

Cost of Sales

(10,971)

(12,907)

17.6%

Gross Profit

5,782

5,992

3.6%

Gross margin

34.5%

31.7%

-281bps

OPEX

(3,572)

(4,139)

15.9%

Opex/sales

21.3%

21.9%

57.97bps

Net Finance cost/income

1.0

(273)

-28280.5%

Foreign exchange gain/loss

(4,701)

(1,794)

61.8%

PBT

(2,431)

(181)

92.6%

PBT margin

-14.5%

-1.0%

1355bps

Tax

845

58

-93.1%

Tax rate

34.8%

32.0%

-277bps

PAT

(1,586)

(123)

92.2%

PAT margin

-9.5%

-0.7%

881bps

Source: NSE, Investment One Research

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