PZ Cussons, the 'Imperial Leather' soap maker, warned that full-year profits will be at the lower end of market expectations, as it struggles with problems largely beyond its control, including civil unrest in Nigeria, its largest market.
"We anticipate trading conditions in some markets will continue to be difficult for the remainder of the year, and, in particular, we are closely monitoring the current economic and social tensions in Nigeria which may further [have an] impact [on] the year-end out-turn," said Richard Harvey, Chairman of PZ Cussons.
"Overall, we anticipate that results for the full year will be towards the bottom end of the range of current expectations," Harvey revealed.
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Revenue in the half year to the end of November rose 10.5% to £414.0m from £374.8m the year before, with the group saying it was pleased with sales growth in its core markets of the UK, Indonesia and Nigeria. Adverse exchange rate movements depressed revenue by about £8m in sterling terms.
Underlying profit before taxation slipped 13.0% to £40.2m from £46.2m the year before. Statutory profit before taxation fell 11.7% to £39.3m from £44.5m a year earlier. Rising raw material prices put a £20m dent in profits.
As well as being squeezed by increased raw material costs, profits were also around £1.1m lower than they would have been had exchange rates stayed constant.
Profits in Nigeria were flat as a result of increased input costs, while Asia revenue and profit both dipped from the year before as a result of tough trading conditions in Australia, Thailand and the Middle East, though sales and profits in Indonesia were up year-on-year.
Revenue in Europe was higher as a result of good growth in both UK divisions as well as progress in Poland, although margins were affected by higher raw material costs. Trading conditions in Greece remain difficult as a result of the economic environment.
The statement made reference to the civil unrest over Christmas and the New Year in Nigeria, its largest market, saying sales in the northern states had been hit by the social instability over Christmas, while the New Year protests about the removal of the fuel duty subsidy had affected production in all of its Nigerian factories, and had also hit sales.
"Whilst the strike has now ended and the fuel subsidies have been partially reintroduced, continued social instability in the North together with ongoing fiscal reforms may create further unrest in the balance of year," the company statement said.
Elsewhere, the company expects the trading environment will continue to be difficult in some markets, and mentioned the UK in particular where promotional activity is getting especially cut-throat. On top of that, there seems little prospect of any relief from the pressure on margins exerted by high raw material prices, although input costs do seem to have now stabilised, albeit at a high level.
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