December 14, 2017 / 7:44 AM / 2 years ago

PZ Cussons warns of lower half year operating profit; shares fall

(Reuters) - Soap and shampoo maker PZ Cussons said first-half operating profit was expected to fall 10 percent as reduced margins in its European and African businesses weighed on profitability.

The company, which sells brands such as Carex and Five:Am., said the performance in these two regions were expected to improve in the second half with new product launches and distribution expansion.

Shares of the company were down 4.8 percent at 312 pence as of 0830 GMT, making them the third biggest loser on the FTSE 250 mid-cap index.

PZ Cussons’s business in Africa, which accounts for 43 percent of its total sales, has been hit by weak market condition in Nigeria stemming from the devaluation of Naira.

The maker of Original Source shower gel counts Nigeria as its biggest market, where it sells soaps to milk powder to electric goods.

Nigeria, Africa’s largest economy, is suffering its worst financial crisis in decades as a slump in oil revenues hammers public finances and the naira.

In the UK, consumers are shopping cautiously, reflecting general cost inflation outstripping wage growth, and broader economic uncertainty, the company said.

However, the company said planned brand initiatives in the second half would help it deliver a full-year outturn broadly in line with the prior year.

Brokerage Investec trimmed its full-year 2018 pretax profit estimate by 3.5 percent, citing shortfall in sales in the first half of the year.

PZ Cussons stock has fallen more than 6.5 percent year-to-date.

Reporting by Rahul B in Bengaluru; Editing by Amrutha Gayathri

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