Fixed Assets Disposal Drives PZ’s 2022 FY Performance
Kayode Tokede
PZ Cussons Nigeria Plc, a maker of personal healthcare and consumer goods, reported growth in profit following the management disposal of fixed assets.
As stated in its audited financial statement for full year ended May 31, 2022, the multinational company noted that the profit on disposal relates mainly to sales of non-core residential properties in Ikoyi, Lagos state.
According to the company, N9.84 billion was received as consideration from the sales of the properties resulting in profit on disposal of N8.86 billion.
The company has maintained its profitability momentum after an initial setback, as consumers’ habits in response to COVID-19 helped increase sales.
The company’s 2022 performance showed a significant increase in revenue as demand for its Home & personal care products and durable electrical appliances on the back of high inflation, during which consumers and businesses both had to contend with the rising cost of products and services.
This then resulted in buyers paying more for the same amount of goods.
PZ Cussons Nigeria reported N99.5billion in revenue in 2022, representing 20.5 per cent increase from N82.6billion.
Revenue from Home and personal care products grew by 21.8 per cent to N58.26billion in 2022 from N47.83billion in 2021, while revenue from durable electrical appliances gained 18.7per cent to N41.24billion in 2022 from N34.74billion reported in 2021.
The home and personal care products include the production and sale of Morning Fresh, Zip, Canoe, Premier, Excel, Joy, Stella, Venus, Imperial Leather, Cussons Baby, Original Source, Carex, Robb, among others.
Durable electrical appliances include the production and sale of Haier Thermocool Refrigerators, Freezers, Televisions, Generators, Air conditioners, Washing Machines, among others
Geographical location showed a N96.57billion revenue generated within Nigeria from N79.2billion in 2021 and about 13 per cent drop in revenue generated outside Nigeria from N3.37billion in 2021 from N2.93billion in 2022.
Macro economic challenges
On the backdrop of inflation rate, among macro economy challenges, the company reported 26 per cent increase in cost of sales to N75.2billion in 2022 from N59.48billion in 2021.
The growth in PZ Cusson Nigeria cost of sales was as a result of N61.06billion changes in inventories of finished goods and work in progress in 2022 from N50.12billion in 2021.
Meanwhile, gross profit closed 2022 at N24.3 billion from N23.09 billion in 2021 to bring its gross profit margin to 24.4per cent in 2022 from 27.97per cent in 2021.
Total operating expenses rose by 26 per cent to N20.22billon in 2022 from N16.11billion in 2021, driven by significant increase in administrative expenses.
The company reported N10.21billion in administrative expenses in 2022, representing an increase of 50.44 per cent from N6.78billion reported in 2021, while Selling and distribution expenses rose gy 7.4 per cent to N10.02billion in 2022 from N9.32billion in 2021.
With the scarcity of foreign exchange, PZ Cussons Nigeria reported N4.2billion foreign exchange loss in 2022 from N5.95billion in 2021.
Key contributing factor to PZ Cussons Nigeria 2022 performance was the management’s profit generated from non-core business operations.
Non-core business operation rose significantly by 352.97per cent to N9.41 billion in 2022 from N2.08 billion in 2021.
The breakdown showed a 44.5 per cent growth in scrap sales and rental income to N258.7million in 2022 from N179.03million in 2021, while Profit on disposal of fixed assets moved to N8.87billion in 2022 from N1.9billion reported in 2021.
In addition to the non-core business performance was N288.16million sundry income in the year under review.
Interest income closed 2022 at N836.14million in 2022 from N238.56million in 2021, Interest cost dropped significantly to N8.9million in 2022 from N71.48million in 2021.
With the performance in revenue, non-core business income and management of costs, PZ Cusson Nigeria closed 2022 financial year with a profit before tax of N10.01 billion, representing an increase of 214 per cent from N3.19billion in 2021.
It also reported 276 per cent increase in profit after tax to N6.699 billion in 2022 from N1.779 billion in 2021, with revenue growth across all key categories, despite the challenging macro environment.
The company, therefore, declared dividend of N4billion, representing a payment of N 1.01 per ordinary share for its 2022 financial year as against N992.62million or N0.25 paid to shareholders in 2021 financial year.
Spike in liabilities
PZ Cusssons Nigeria’s, though reported increase in total assets, but its trade and other payable increased in the year under review.
As total assets rose by 25.3 per cent to N109.47billion in 2022 from N87.34billion in 2021, total liabilities also rose by 29.07per cent to oN71.7billion in 2022 from N55.6billion in 2021.
It means that liabilities that comprises of trade & other payable contributed about 65.5 per cent to the company’s total assets in 2022 from 63.63 per cent in 2021.
PZ Cusssons Nigeria closed 2022 financial year with N60.99billion trade & other payable as against N46.67 billion in 2021 to push total current liabilities to N66.08billion, representing an increase of 34 per cent from N49.4billion in 2021.
In addition to balance sheet, PZ Cussons Nigeria recorded N37.74billion total equity in 2022 from N31.8billion in 2021 as its equity attributable to equity holders of parent company moved from N28.9billion in 2021 to N34.2billion in 2022.
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.
Points to consider
The recent performance by PZ Cusson Nigeria has attracted local/foreign investors to its stock. With outstanding shares of 3,970,477,045.00, and trading at N9.25 as at October 21, 2022.
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.
The company in a report said Nigeria and Indonesia are among the most attractive baby markets in the world, ranking 3rd and 55th respectively for the number of annual births.
According to the company, “Combined, there are 12 million babies born annually in the two markets, which is nearly three times the amount born in the US. The Baby personal care category is expected to grow 7.6 per cent over the period 2021–2026 in Nigeria, and 11.9per cent in Indonesia, driven by a combination of population growth and increased wealth.
“We are well-placed to take advantage of these attractive market trends, with leading positions through our Cussons Baby brand.”
