PZ CUSSONS NIGERIA PLC 9M'17/18 - Earnings print below estimates as margins waver
Earnings print below estimates as margins waver
PZ Cussons Plc (PZ) recently released its 9M’17/18 financial results (for period ended 28 Feb 2018) with Revenue and PAT coming in 5% and 37% below our estimates at ₦63 billion (9M’16/17: ₦57 billion) and ₦1.3 billion (9M’16/17: ₦1.6 billion) respectively. Given that the company’s peak selling season comes in its third quarter, and also guided by the 5-year average q/q growth rate of c.22% in the period, we had expected a 15% q/q Revenue growth in Q3. Contrarily, PZ recorded a flat q/q revenue performance at ₦22 billion, 13% below our estimate and 7% lower y/y. Overall, 9M’17/18 EBIT came in 24% lower than we expected at ₦6 billion – down 30% y/y. Whilst foreign exchange losses increased to ₦3.3 billion (H1’17/18: ₦2.6 billion), we highlight that the loss came in 14% lower than we had estimated and 46% lower y/y. Overall, PAT for the period came in 16% lower y/y at ₦1.3 billion, below ₦2.1 billion we had expected.
As part of its initiatives to navigate the operating environment, PZ UK stated plans to reassess its operating model in order to reduce its cost base structurally and also improve operating efficiency. Whilst we expect successful implementation of these plans to bode well for margins, we revise our FY’17/18 EBIT margin estimate lower to 9% (Previous: 12%) to reflect the weaker run rate. We have also however revised our FX loss assumption 20% lower to ₦4 billion following the improvement recorded in Q3. Also driven by our reduced revenue estimate, we revise our FY’17/18 PAT estimate to ₦2.2 billion (Previous: ₦3.5 billion), translating to a 40% y/y decline. Our 12-Month Target Price is also revised lower to ₦24.37 (Previous: ₦25.74).
PZ Cussons is a consumer products group. Co. is engaged in the manufacture and distribution of soaps, detergents, toiletries, beauty products, pharmaceuticals, electrical goods, edible oils, fats and spreads and nutritional products. Co. operates in four main categories: personal care, which manufactures and sells bar soap, liquid hand wash, shower gel, skincare and haircare products in Africa, Asia and Europe; home care, which sells brands Dish Care and Fabric Care segments; electricals (Africa only), which provides the African market electrical products including refrigerators and freezers; and foods and nutrition, which comprise of dairy products, cooking ingredients and baby food.
Vetiva provides clients with independent and unbiased access to analysis and opinion. We keep our clients on the cutting edge of market information and provide up to date market intelligence on quoted companies. Our services allow brokers, investment firms, and asset managers focus their energies on developing investment strategies and client relationships.
Unfortunately, this report is not available for the investor type or country you selected.
Browse all ResearchPool reportsReport is subscription only.
Thank you, your report is ready.
Thank you, your report is ready.