PZ Cussons still expecting profits growth this year

Tough trading conditions in Nigeria and Australia plus soaring raw material costs took the shine off results for PZ Cussons, the 'Imperial Leather' soap maker.

For the year to May 31st profit before tax and exceptional items was down 15.2%, in line with guidance issued at the time of the group's profit warning in March, to £92.3m from £108.9m the year before. Sharp increases in raw material costs, estimated at £25m year-on-year, and unfavourable market conditions in Australia and Nigeria, put a serious dent in profits. Currency movements wiped off around £2m from profits. The market had pencilled in a figure of £88.8m for adjusted profit before tax.

Statutory profit before tax slumped 55.1% to £48.5m from £108.1m after the group took exceptional charges of £43.8m, mainly related to the group's major supply chain optimisation project, the Beauty division's acquisition and associated integration of the Fudge hair care acquisition, and the full impairment of one of the group's Australian Home Care brands due to the difficult market conditions down under.

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Revenue rose 4.7% to £858.9m from £820.7m the year before, but was a shade below the £862m the market had been expecting. Foreign exchange movements knocked around £16m off revenue this time round versus the year before.

"During the year, underlying revenue growth continued across the business, particularly in the UK, in the Beauty division and in Indonesia. As we start the current financial year this momentum, together with our new Cussons Mum & Me and Fudge ranges, will help to ensure this growth continues," said PZ Cussons's Chairman, Richard Harvey.

In Africa, revenue growth in Nigeria was strong during the first half of the financial year but then affected by the social unrest in the north and the impact of the partial removal of the fuel duty subsidy in January. Raw material cost increases dented margins in the first half although these began to improve during the second half as a result of price increases and margin improvement initiatives.

In Asia, Indonesia was a bright spot but the Aussie home care performance was poor as retailers gave more shelf space to own-label products, while trading conditions were also tough in Thailand and the Middle East.

In Europe, the UK and Poland performed well, with the Beauty division delivering a strong performance in its first year as a separate entity.

Net debt at the end of May stood at £17.9m, compared to a net surplus of £51.8m a year earlier.

An unchanged final dividend of 4.487p has been declared, resulting in a 1.6% increase in the full year pay-out to 6.717p from 6.61p the year before.

"Whilst the situation in the group's important Nigerian market remains fragile, we are confident that the group will return to profitable growth in the current financial year. Overall performance since the year-end has been in line with expectations," Chairman Richard Harvey said.

JH