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Tuesday, July 21, 2015

Weak oil price, currency factors, and Nigeria violence threat hits profits at Imperial Leather soap manufacturer PZ Cussons

The tumbling oil price, a weak currency and the threat of violence in Nigeria has hit profits at the maker of Imperial Leather soap.
St Tropez fake tan and Sanctuary Spa bubble bath maker PZ Cussons said full year pre-tax profit tumbled 32 per cent to £84million and sales fell nearly 5 per cent to £819million.
Around 40 per cent of PZ’s sales come from Africa and Nigeria is its biggest market in the continent.
In a lather: The tumbling oil price, a weak currency and the threat of violence in Nigeria has hit profits at the maker of Imperial Leather soap
In a lather: The tumbling oil price, a weak currency and the threat of violence in Nigeria has hit profits at the maker of Imperial Leather soap
In a statement it said: ‘Disruption in the north, the Ebola outbreak, presidential elections and a significant currency devaluation have all contributed to a very difficult operating environment. 


'Notwithstanding this, we have delivered local growth… and are well positioned with leading market shares to capitalise on Nigeria's future growth.’
The full year update was largely as the City expected and Investec analyst Nicola Mallard described the results as ‘solid…in some challenging conditions’.

Analysts at Canaccord Genuity pointed out the region had shown improvement in the second half and added: ‘Nigeria has improved still further and we observe a more stable oil price and the successful running of presidential elections there in April/May… the backdrop remains more volatile than most, but the long term potential, given demographics, low levels of market penetration and a very underdeveloped modern trade are highly attractive.’
By lunchtime, PZ Cusson's shares were 4p lower at 356p.
Overall like for like sales grew 2.3 per cent but sales in Australia were disappointing. In the UK demand for its St Tropez and Sanctuary brands helped sales across its beauty category and the launch of a new St Tropez shower gel tanning product has been popular with the company now expecting sales of 1 million – well above its original forecast of 30,000 bottles.
It said ‘product innovation’ had helped drive sales across its soap division which includes brands Imperial leather, Original Source and Carex.
Brandon Leigh, chief financial officer, said: ‘We have very strong brands and we are focused on growing these in all our markets.’
He said despite the difficulties of foreign exchange fluctuations and the largely tough economic backdrop the group increased its dividend for a record 42nd year in a row.
He added: ‘Our developed market business growth provides the cash to continue to grow the dividend.
It announced a final dividend of 5.39p – equating to a total dividend of 8p a share - a 3.1 per cent increase.
Chairman Richard Harvey said: ‘Performance since the year-end has been in line with expectations. Whilst the outlook remains challenging, the group's focus on its values, robust long-term strategy, our innovative product pipeline… provide a strong… platform for future sustainable growth.’

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