July 29, 2008 / 6:39 AM / 10 years ago

UPDATE 2-PZ Cussons boosted by strong trading in Nigeria

(Adds FD, analyst comment, shares)

By Matthew Scuffham

LONDON, July 29 (Reuters) - British soap and home products maker PZ Cussons (PZC.L) reported full-year profits which were ahead of market expectations, boosted by strong trading in Nigeria which now accounts for over a third of profits.

The company, which makes Imperial Leather and Carex soaps, on Tuesday reported a 12 percent rise in pretax profit for the year to May 31 to 76.5 million pounds ($152 million).

Market expectations ranged between 69 and 76 million, with the consensus at 73.7 million, according to a Reuters poll of four analysts.

“2008 has been another successful year for PZ Cussons with profitability being delivered on track despite the challenging economic environment and the significant increases in input costs,” said Chairman Anthony Green.

Nigeria’s economy has benefited from rising oil prices bolstering its currency reserves and a stable political environment encouraging foreign investment.

Aside from selling its core product range, which also includes Original Source natural oils and Morning Fresh washing-up liquid, Cussons has set up electricals and nutrition joint ventures in Nigeria and has opened an electrical retail superstore in Lagos.

The company has also begun a 39 million pounds investment programme to upgrade its Nigerian manufacturing facilities.

“It is a key beneficiary of the growth in wealth in Nigeria — a key market,” said Cazenove analyst Adeline Taing.

Cussons said its overall performance since the year end had been in line with management expectations and expressed optimism for the current year.

The company, which bought spa and beauty products business, The Sanctuary, for 75 million pounds in January, said the strength of its balance sheet still allowed the potential for further investment opportunities. Its net debt is only 32 million pounds.

Finance Director Brandon Leigh told Reuters the company is pursuing bolt-on brand acquisitions in emerging markets.

“There’s a whole host of potential for us there. We do have plenty of organic growth but, yes, we are looking at other growth opportunities,” he said in a telephone interview.

Leigh told Reuters commodity costs, including oil and chemicals, rose by $30 million in the company’s last financial year which had been fully offset through a mixture of higher selling prices and cost saving programmes.

The company anticipates a further rise of close to $30 million in the current year which it again expects to mitigate through margin improvement programmes.

Shares in PZ Cussons, which have outperformed the personal goods sector .FTASX3760 by nearly 30 percent in the last year, were up a further 1.6 percent at 172-3/4 pence at 0845 GMT.

“From an investment point of view the company’s relatively defensive product portfolio and exposure to the oil driven economy of Nigeria should be an attraction in the current uncertain economic environment as should the strong balance sheet,” said Cazenove’s Taing.

Cussons is paying a final dividend of 3.625 pence per share, making a total for the year of 4.7 pence, up 10 percent. (Editing by Louise Ireland)

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