Thursday, September 07, 2017 / 12:54 PM / FBNQuest Research
Event: PZ Cussons Nigeria reports Q4 2017 (end-May) results
Implications: Positive reaction by the market likely
Positives: Q4 PBT and PAT grew by 144% y/y and 371% y/y to N2.5bn and N1.8bn respectively
Negatives: N2.7bn fx loss reported
Late yesterday, PZ Cussons Nigeria (PZ) published its Q4 2017 (end-May) results, delivering another set of strong numbers similar to the prior quarter. Sales grew 19.1% y/y to N22.5bn while PBT and PAT increased by 143.6% y/y and 370.7% y/y to N2.5bn and N1.8bn respectively.
Its parent company, PZ Cussons UK, stated in its Q4 2017 group trading statement that the Personal Care, Home Care, Food & Nutrition and Electrical businesses for the Nigerian subsidiary performed relatively well. The major driver behind the company’s strong bottomline was a gross margin expansion of 168bps y/y to 38.8%, which was strong enough to offset a 14.9% y/y rise in operating expenses and a N2.7bn exchange rate loss.
With these results, PZ has come a long way from mid-2015 to early 2017 when fx liquidity issues in Nigeria hampered its profitability. Although the results were strong y/y, they were relatively weaker than the more impressive Q3 2017 results. Sales and PBT fell by -5.7% q/q and -11.7% q/q respectively while PAT was flattish q/q.
On a full year basis, sales grew by 14.5% y/y to N79.6bn while PBT and PAT advanced 52.8% y/y and 78.4% y/y to N4.8bn and N3.3bn respectively. The Branded Consumer Goods segment, which advanced by 22.2% y/y to N56.2bn, accounted for over 70% of the overall sales growth. The Durable Electrical Appliances segment sales of N23.4bn was however flattish y/y.
The full year group gross margin expanded strongly, by 604bps y/y to 35.1%. Fx loss came in at N8.8bn vs N2.9bn in the prior year. This can be attributed to fx-denominated payables among its current liabilities. Trade payables grew by 54.5% y/y to N39.7bn in 2017.
Compared with our estimates, Q4 sales beat by 10.8% while PBT was ahead by 26.2%. The full year sales and PBT were 2.8% and 11.8% ahead of our forecasts. The company declared a final dividend of 50k which implies a dividend yield of 2%.
PZ shares have gained 78.9% ytd vs the NSE ASI’s 32.5%. By and large, improved fx liquidity has been favourable to PZ and other consumer goods companies. We expect a positive reaction by the market to these results.
We rate the stock Neutral. Our estimates are under review.
PZ Cussons Nigeria Q4 2017 results vs. FBNQuest Research estimates (N millions)
1. PZ Cussons Nigeria Plc - Better-Than-Expected Recovery in Q3'17
2. PZ Cussons Nigeria Plc - Lower OPEX Supports Q3’17 Earnings
3. PZ Cussons Nigeria Reports N1.2bn FX Loss in Q3 2017 Results
4. PZ declares N1.60 bln PAT in Q3 2017 Result,(SP:N13.99k)
5. PZ Nigeria Plc FQ2 17- Strong operating performance salvage earnings
6. PZ declares N288.95 mln Loss in Q2 17 Result SP N14.25k
7. PZ Cussons Nigeria Plc to File Q2 Ended 30th Nov 2016 Financial Statements on 26th Jan 2017