PZ Sustains Profitability Amid Hike in Operating Expenses

Kayode Tokede

Despite a hike in operating expenses, PZ Cusson Nigeria Plc unaudited year result and accounts for the period ended May 31, 2022 showed sustained growth in profit driven by double-digit growth in revenue.

Interplay between hike in foreign exchange loss and significant increase in cost of sales had threatened the multinational company’s profit & loss figures recovery in the year under review.

The company has not declared a dividend.

The company’s revenue hits another milestone in 2022, driven by growth recorded in its home and personal care products and durable electrical appliances amid low purchasing power due to double-digit inflation, among other factors.

The breakdown of revenue in the last 5-year revealed that PZ Cusson Nigeria reported N100.04 billion revenue, an increase of 21.1 per cent from N82.58 billion revenue reported in 2021. The firm had reported N66.99 billion revenue in 2020, a N74.34 billion revenue in 2019 from N80.55 billion reported in 2018 and closed 2017 with revenue of N78.22 billion.

Personal care products

The company’s home and personal care products includes morning fresh, Zip, Canoe, Premier, Excel, Joy, Stella, Venus, Imperial leather, Cussons Baby, Original Source, Carex, Robb, among others.

The Dural electrical appliance of PZ Cussons includes Thermocool Refrigerators, Freezers, Televisions, Generators, Air conditioners, Washing Machines, among others.

Cost of sales for the period grew significantly 27.4 per cent to N75.7 billion in 2022 from N59.48 billion in 2021.

So, Cost of sales/revenue increased to 75.72 per cent in 2022 from 72.03 per cent in 2021.

The growth in revenue contributed to 5.1 6per cent increase in gross profit to N24.3 billion in 2022 from N23.09 billion reported in 2021.

This dragged gross profit margin to 24.28 per cent in 2022 from 27.9 per cent in 2021.  PZ Cusson Nigeria is exposed to commodity price risk arises from specific needs to buy quality and quality to meets its manufacturing standards.

These raw materials include crude palm oil, tallow, sodium silicate and linear alkly benzene. The company has been effective with its method of purchasing these materials in advances and this is based on management’s past experience with price movement in Nigeria.

Meanwhile, total operating cost of PZ Cusson Nigeria rose by nearly seven per cent to N16.9 billion in 2022 from N15.86 billion reported in 2021.  

Due to the operating environment, the company recorded a growth in impairment of trade receivables to N139.4 million in 2022 from N85.06 million in 2021.

Impairment loss

The impairment loss as at May 31, 2022 related to several customers that are not expected to be able to pay their outstanding balances, mainly due to economic circumstances.

Interestingly, in the year under review, the company reported foreign exchange loss of N4.2 billion from N5.95 billion reported in the prior year. 

On this, operating profit closed 2021 at N3.08 billion as against N1.19 billion operating profit recorded in 2021. PZ Cusson Nigeria reported N5.76 billion income from non-core business income in 2022 from N2.07 billion in 2021.

From the profit & loss figures, PZ Cusson Nigeria reported 251.96 per cent increase in interest income to N839.64 million in 2022 from N238.56 million in 2021 as interest cost dropped significantly by 84.6 per cent to N11 million in 2022 from N71.48 million in 2021.

Meanwhile, the group closed the year with N9.67 billion profit before tax from N3.44 billion profit before tax reported in 2021 financial year. With tax expenses of N3.27 billion, PZ Cusson Nigeria reported profit of N6.4 billion from N1.7 billion reported in 2021.

Trade and other payables

PZ Cusson Nigeria in 2022 unaudited financial statement reported significant increase in trade and other payables to increase total liabilities.

As trade and other payables rose by 32.4 per cent to N57.89 billion in 2022 from N43.74 billion in 2021, the Group current liabilities rose by 35.4 per cent to N62.3 billion in 2022 from N46 billion in 2021.

Total non-current liabilities grew by 14.9 per cent to N5.77 billion in 2022 from N6.72 billion reported in 2021.

Meanwhile, PZ Cusson Nigeria reported a 12 per cent increase in total assets to N108.05 billion in 2022 from N87.34 billion in 2021, while total equity gained 16 per cent to N39.96billion in 2022 from N34.55 billion in 2021.

Conclusion

The group and company are controlled by PZ Cusson (Holdings) Limited, incorporated in the UK, which owns 73.27 per cent (2020: 73.27 per cent) of the group and company’s shares. The remaining 26.73 per cent (2020: 26.73 per cent) of the shares are widely held.

The recent performance by PZ Cusson Nigeria has not attracted local/foreign investors to its stock. With outstanding shares of 3,970,477,045.00, and trading at N9.60 as at June 30, 2022, earnings and dividend to shareholders are two intrinsic factors driving the stock price on the Nigerian Exchange Limited (NGX).

The company needed to sustain its revenue growth and source materials locally in a move to reduce cost of sales and drive bottom-line performance.