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PZ Cussons Nigeria Reports N1.2bn FX Loss in Q3 2017 Results

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Monday, March 27, 2017/4:10 PM /FBNQuest Research

Event:                       PZ Cussons Nigeria reports Q3 2017 (end-February) results

Implications:        Positive reaction by the market likely

Positives:                PBT and PAT grew by 182% y/y and 131% y/y to N2.8bn and N1.8bn respectively

Negatives:               N1.2bn fx loss reported


Last week, PZ Cussons Nigeria (PZ) published its Q3 2017 (end-Feb) results. This is PZ’s most impressive results in a while.

While sales grew by 19.0% y/y to N23.8bn, the highest quarterly revenue in in recent times, both PBT and PBT advanced by over 100% y/y.

Although the comparable results in Q3 2016 were weak, the results indicate that PZ is on a recovery path, following some improvement in fx liquidity. Strategies introduced by the company to improve topline seem to be paying off, coupled with the impact of increased sales due to seasonality.


Also, a gross margin expansion of 820bps to 32.5% more than offset a N1.2bn fx loss to lead to a PBT of N2.8bn during the quarter. We suspect the company is still benefitting from using old raw materials purchased at historical prices, like in the prior quarter.

We shall seek more clarification from management. Regarding the fx loss of N1.2bn, fx related trade payables increased by 11.1% in Q3 from N41.5bn in Q2 2017 (end-Nov) and N25.7bn at FY 2016 (end-May).

Sequential trends were similar to the y/y changes. Sales grew by 44.1% q/q, enough to offset the negative impact of a -183bp y/y gross margin contraction, an 11.0% increase in operating expenses and a 391.9% q/q increase in fx losses.

As such, PBT grew by 38.6% q/q. The PAT, which was up 70.5% q/q, grew faster than the PBT due to a -76.4% q/q decline in the minority interest charge.

Over the nine month period, PZ reported revenue growth of 12.8% y/y, gross margin expansion of 759bps y/y to 33.6%, a marginal y/y rise in opex and net interest income of N150m (vs –N390m in prior year).

Cumulative fx loss was N6.1bn. However, PBT still grew by 10.0% y/y N2.4bn while PAT of N1.5bn was flattish y/y.

Compared with our estimates, Q3 sales were ahead by 16.9% while the positive surprise in both pre and post-tax profits averaged 71.0% (largely due to the impressive sales). Similar comparisons can be observed for the 9M results.


On an annualised basis, the nine month sales were 5.0% ahead of consensus’ N72bn estimate but PBT was behind by 28.0%. Year-to-date, PZ shares have shed -3.5% (vs -5.3% for the ASI).

PZ’s results in the past 2 quarters show a direct correlation with improved fx liquidity and stability in the naira exchange rate to the US dollar. Its peer, Unilever Nigeria, also reported decent Q4 2016 results last week.

If the present fx climate continues, we expect the company to reverse y/y declines it reported in its FY 2016 results when it publishes its FY 2017 (end-May) results. We expect a positive reaction by the market to these results.

PZ Cussons Nigeria Q3 2017 results vs. FBNQuest Research estimates (N millions)




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