PZ Cussons Nigeria Reports Q4 2017 Results – Positive Reaction by the Market Likely


September 7, 2017/FBNQuest Research

:                       PZ Cussons Nigeria reports Q4 2017 (end-May) results

Implications:        Positive reaction by the market likely

Positives:                Q4 PBT and PAT grew by 144% y/y and 371% y/y to N2.5bn and N1.8bn respectively

Negatives:               N2.7bn fx loss reported

Late yesterday, PZ Cussons Nigeria (PZ) published its Q4 2017 (end-May) results, delivering another set of strong numbers similar to the prior quarter. Sales grew 19.1% y/y to N22.5bn while PBT and PAT increased by 143.6% y/y and 370.7% y/y to N2.5bn and N1.8bn respectively.

Its parent company, PZ Cussons UK, stated in its Q4 2017 group trading statement that the Personal Care, Home Care, Food & Nutrition and Electrical businesses for the Nigerian subsidiary performed relatively well. The major driver behind the company’s strong bottomline was a gross margin expansion of 168bps y/y to 38.8%, which was strong enough to offset a 14.9% y/y rise in operating expenses and a N2.7bn exchange rate loss.

With these results, PZ has come a long way from mid-2015 to early 2017 when fx liquidity issues in Nigeria hampered its profitability. Although the results were strong y/y, they were relatively weaker than the more impressive Q3 2017 results. Sales and PBT fell by -5.7% q/q and -11.7% q/q respectively while PAT was flattish q/q.

On a full year basis, sales grew by 14.5% y/y to N79.6bn while PBT and PAT advanced 52.8% y/y and 78.4% y/y to N4.8bn and N3.3bn respectively. The Branded Consumer Goods segment, which advanced by 22.2% y/y to N56.2bn, accounted for over 70% of the overall sales growth. The Durable Electrical Appliances segment sales of N23.4bn was however flattish y/y.

The full year group gross margin expanded strongly, by 604bps y/y to 35.1%. Fx loss came in at N8.8bn vs N2.9bn in the prior year. This can be attributed to fx-denominated payables among its current liabilities. Trade payables grew by 54.5% y/y to N39.7bn in 2017.

Compared with our estimates, Q4 sales beat by 10.8% while PBT was ahead by 26.2%. The full year sales and PBT were 2.8% and 11.8% ahead of our forecasts. The company declared a final dividend of 50k which implies a dividend yield of 2%.

PZ shares have gained 78.9% ytd vs the NSE ASI’s 32.5%. By and large, improved fx liquidity has been favourable to PZ and other consumer goods companies. We expect a positive reaction by the market to these results.

We rate the stock Neutral. Our estimates are under review.

PZ Cussons Nigeria Q4 2017 results vs. FBNQuest Research estimates (N millions)