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PZ CUSSONS NIGERIA PLC FY'17 - Impressive end to FY'17, EPS up 73% y/y

Impressive end to FY’17, EPS up 73% y/y                                                       

PZ released FY’17 results (year ended 31 May) posting a 15% y/y revenue growth to ₦79.6 billion vs. Vetiva’s ₦78.3 billion estimate. Looking at the operating segments, growth was solely driven by the Home and Personal Care segment (up 22% y/y) as the Electronics segment continued to bear the brunt of the pressured consumer wallets. Whilst we had expected the relatively improved foreign exchange market to cap FX losses in the last quarter of the year, PZ recorded another ₦2.7 billion FX loss on dollar denominated trade payables in Q4’17, bringing total FX loss to ₦8.8 billion for FY’17 (FY’16: ₦2.9 billion, Vetiva: ₦6.1 billion). The impact was however cushioned by sustained improvement in production and operating costs through the year.                                           

With this, PZ recorded its first bottom line growth in four years as PAT rose 73% y/y to ₦3.69 billion, slightly below Vetiva’s ₦3.80 billion estimate. Overall, the Board of Directors declared a dividend per share of ₦0.50 (below our ₦0.65/share estimate) – translating to a 60% dividend payout ratio. We revise our FY’18 revenue estimate higher to ₦84.0 billion (Previous: ₦82.2 billion). Whilst we have reviewed our cost estimates downwards, we are more cautious around FX losses. As such, our FY’18 EPS is little changed at ₦1.03 (Previous: ₦1.01). Overall, we revise our Target Price upwards to ₦22.65 (Previous: ₦21.40).                                      

PZ Cussons Nigeria PLC is amongst Nigeria’s top three HPC companies with the Nigerian business representing parent company, PZ Cussons PLC’s largest market. The company’s sales span two main business segments – Consumer Branded Goods (home & personal care (HPC)) and Durable Electronic Appliances (White Goods). PZ also distributes the products of Nutricima Limited, Harefield Industrial Nigeria Limited and PZWilmar Limited.