Stock & Analyst Updates | |
Stock & Analyst Updates | |
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Tuesday,
October 02, 2018 / 04:07 PM / Afrinvest
Research
• Q1’18/19 revenue misses by 9%, prints 14% lower y/y
• High OPEX drags earnings, EBIT down 78% y/y
• PZ records ₦205 million loss after tax to start the year
• Earnings estimates revised lower following Q1’18/19
flop
Q1’18/19 revenue
misses Vetiva estimate by 9%
PZ Cussons released its Q1’18/19 financial statements
showing a 14% y/y moderation in revenue to ₦15.9 billion (Vetiva estimate: ₦17.5 billion) and beginning
the year with a ₦205
million loss after tax (Vetiva estimate: ₦1.0 billion PAT). Revenue for the quarter came in as
the lowest Q1 performance in three years and 9% below our estimate amidst
sustained difficult trading conditions according to the company.
Though Management has alluded to the implementation of
innovative marketing strategies to strengthen growth for the past three
quarters, recent performances are yet to show any benefits from these plans.
Whilst we understand that tighter disposable income has subdued sales in PZ’s
Electricals segment, the tepid performance across home and personal care
products is quite unimpressive given the stronger turnover trend observed
across its competitors. We believe a mix of intense competition, slow response
to market developments and seemingly weaker brand equity on its HPC products
have contributed in reducing market share and limiting pricing power.
High production costs,
OPEX drag operating profit to five-year low
Gross Profit came in 12% and 24% below our expectation
and the prior year respectively amid sustained margin volatility. Gross margin
came in at 29%, lower than our 30% estimate and way off 36% recorded in the
previous quarter. Meanwhile, a flat y/y performance in operating expenses
relative to the 14% y/y decline in revenue was a major drag on earnings.
Notably, Q1’18/19 EBIT printed at ₦385 million, significantly behind our ₦1.9 billion estimate and the lowest figure recorded
since Q4’13.
However, foreign exchange losses moderated 63% y/y to ₦668 million, albeit
still above our ₦420
million estimate. Overall, bottom line for the quarter came in negative at ₦205 million, marginally
higher than the ₦123
million loss recorded in Q1’17/18.
Bearish on sales
capacity for FY’18/19
We revise our FY’18/19 revenue estimate 10% lower to ₦75.1 billion (FY’17/18: ₦80.6 billion) as reduced
product prices and a lower volume rollout weigh on the top line figure. Whilst
we have left our gross margin estimate for the year unchanged, we revise our
OPEX to sales ratio 200bps higher following the Q1’18/19 surprise. As such, we
forecast a 22% y/y decline in operating profit for the year to ₦6.4 billion (Previous: ₦9.2 billion).
Meanwhile, having revised our FX losses higher to ₦2.5 billion (₦2.0 billion), our
FY’18/19 PAT forecast is revised sizably lower to ₦2.6 billion (Previous: ₦4.9 billion, FY’17/18: ₦1.9 billion). Following this, our 12-Month Target
Price of PZ is revised lower to ₦20.15 (Previous: ₦23.79). Despite the unappealing earnings results for the financial year,
the stock remains a BUY at the current market price of ₦12.55.
Related News
1.
PZ
declares N204.63m Loss in Q1 2019 Result,(SP:N12.55k)
2. PZ declares
N1.93 bn PAT in 2018 Audited Results,(SP:N15.00k)
3. PZ Cussons Nigeria Plc Announces Its Board Meeting and Closed Period
4.
PZ Cussons Nigeria Plc Appoints Mr Georgios Sotiropoulos as Executive
Director
5.
PZ Cussons Nigeria Plc Appoints Mr Pedro Barreto as Chief Finance Officer
6.
PZ Cussons Nigeria Plc Q1’18 - FY’18 Begins With a Loss as FX Overhang
Persists
7.
PZ Cussons Q1 2018 Results Showed a Loss after Tax on Input and Operating
Cost Pressure
8.
PZ Cussons Nig. Plc. - Loss in Q1-18; But Profit to Return in Subsequent
Quarters
9.
PZ Cussons Nigeria Q1’18 Results - Pre & Post-tax Losses of N181m and
N61m Respectively Driven by FX
10. PZ declares N123.08
mln Loss in Q1 2018 Result,(SP:N26.00k)