July 24, 2018 / 6:36 AM / 2 years ago

PZ Cussons sees challenging year as profit drops on weak Nigeria sales

(Reuters) - Soaps and cosmetics maker PZ Cussons Plc posted on Tuesday a double-digit drop in annual pretax profit and expects another challenging year ahead, hit by lower sales in Nigeria and weak consumer spending in the UK.

The cautious outlook comes a month after the Imperial Lather brand owner warned that its full-year earnings would be at the lower end of its forecast of 80 million to 85 million pounds on slowing sales in Nigeria - its largest market - and the UK.

“Macro-conditions in Nigeria have resulted in a sharp decline in Africa profits for the year and hence a disappointing result for the Group as a whole,” PZ Cussons Chairperson Caroline Silver said in a statement.

Shares of the Manchester, UK-based company were down about 2.4 percent in early trade on the London Stock Exchange.

The company said last month sales in Nigeria had not picked up during the peak selling season in the country, hitting volumes, prices and margins across most areas of its portfolio in the country.

PZ Cussons also said then that liquidity had not flowed into Nigeria’s economy, despite higher oil prices contributing to increased foreign exchange reserves and a relatively stable exchange rate in Nigeria.

The company, with over a 130-year old history, has also been hit by cautious consumer spending by Britons as the UK faces cost inflation and economic uncertainty after Britain’s vote to leave the European Union.

Operating profit from its African market, which made up 36.1 percent of the total revenue in the year ended May 31, slid 77.7 percent, while operating profit in the UK edged higher only marginally.

PZ Cussons said annual pretax profit fell 23 percent to 66.6 million pounds and revenue fell 5.8 percent to 762.6 million pounds.

The company, which sells brands such as Carex and five:am, reported a 21.5 percent drop in adjusted pretax profit to 80.1 million pounds.

Reporting by Muvija M and Sangameswaran S in Bengaluru; Editing by Amrutha Gayathri

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