How disruptions at Nigeria's ports and weak exchange rates in Africa are bleeding PZ Cussons dry

African markets slide down the profitability of the consumer goods company
3 factors affect PZ Cussons' market in Africa
PZ Cussons' Board approves new strategy to tackle poor market conditions in Nigeria

Nigeria's poor port disruption may have a negative impact of about $6.28 million on PZ Cussons' profit before tax in 2018.

Factors such as weak consumer environment and higher supply chain costs as well as lower exchange rate also hinder profitability of the consumer goods company in Nigeria and other Africa countries.

In Africa, the consumer goods group PZ Cussons recorded a 23% dropped in revenue in the first half of 2018 at £111.3 million ($116.56 million) from £144.6 million ($164.50 million) posted same period in 2017.

In an interim half-year report for November 2018 released last week, the report shows improved profitability in Australia and European market but a weaker performance in Africa majorly driven by the Nigerian market.

In Ghana and Kenya markets, overall profitability was lower than the prior period.

The consumer goods company and maker of Imperial Leather soap, Carex, Venus among others in Nigeria said it expecting an adjusted profit before tax for the full year to be towards £70 million driven by conditions in Africa's populous nation.

Caroline Silver, Chairman, PZ Cussons, Caroline Silver, Chairman, PZ Cussons, Financial News Lists

Commenting on the report, Caroline Silver, Chairperson, PZ Cussons, said the Board has approved specific strategic initiatives which will streamline the company's portfolio of activities and limit exposure to volatility in Nigeria, with more information to be provided in due course.

“We anticipate that consumer demand in all our key markets will remain subdued. Whilst these conditions prevail, we will maintain our strong market shares in key product categories in Nigeria until growth returns to the market.”

PZ Cussons Performance by region (PZ Cussons FY) PZ Cussons Performance by region (PZ Cussons FY) londonstockexchange

“I think it is expected that Nigeria would have pulled the PZ Cussons results down because it is quite a significant market for the group, and during the period under review it was going several economic challenges that affected the business,” Raymond Chimhandamba, a South Africa-based FMCG expert told Business Insider SSA by Pulse.

He said despite the population strength, economic recession and shortage of foeign currency impacted on consumer's purchasing power which in turn affect PZ Cussons' products.

Here are the key highlights of the report seen by Business Insider SSA by Pulse:

Balance sheet remains strong with good cash flow management
Net debt lower than the prior period at £177.2 million (2017: £191.2 million).
Interim dividend maintained at 2.67p per share
Revenue for the first half of 2018 dipped by £335.1 million compared to £373.9 million recorded in the same period in 2017.
Profit for the period stands at £24 million
Adjusted profit before tax for the full year now expected to be towards £70 million (about $80 million).