PZ Nigeria Sustains Growth Despite Hike In OPEX

Kayode Tokede

On the heels of growth in operating expenses, PZ Cusson Nigeria Plc audited year result and accounts for the period ended May 31, 2022 showed sustained growth in profit driven by double-digit growth in revenue.

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

The company declared a dividend of N4billion representing a payment of N 1.01 per ordinary share.

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 N99.5billion revenue, an increase of 20.4 per cent from N82.58billion revenue reported in 2021.

The firm had reported N66.99billion revenue in 2020, a N74.34billion revenue in 2019 from N80.55billion reported in 2018 and closed 2017 with revenue of N78.22billion.

Cost of sales for the period grew significantly 26.4 per cent to N75.2billion in 2022 from N59.48billion in 2021.

So, Cost of sales/revenue increased to 75.6per cent in 2022 from 72.03 per cent in 2021.

The growth in revenue contributed to 5.2per cent increase in gross profit to N24.3billion in 2022 from N23.09billion reported in 2021.

This dragged gross profit margin to 24.4 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 16.11 per cent to N20.22billion in 2022 from N16.11billion reported in 2021. 

Due to the operating environment, the company recorded a growth in impairment of trade receivables to N149.05million in 2022 from N85.06million in 2021.

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 report Exchange loss of N4.2billion from N5.95billionreported in the prior year.

On this, operating loss closed 2022 at N231.5million as against N946.56million operating profit recorded in 2021. PZ Cusson Nigeria reported N9.4billion income from non-core business income in 2022 from N2.07billion in 2021.

The increase in non-core income was driven by N8.87billion profit on disposal of fixed assets in 2022 from N1.9billion reported in 2021.

The profit on disposal relates mainly to sales of non-core residential properties in Ikoyi, Lagos state. N9.84 billion was received as consideration from the sales of the properties resulting in profit on disposal of N8.86 billion.

From the profit & loss figures, PZ Cusson Nigeria reported 251.96 per cent increase in interest income to N839.64million in 2022 from N238.56million in 2021 as interest cost dropped significantly by 84.6 per cent to N11million in 2022 from N71.48million in 2021.

Meanwhile, the group closed the year with N10.01billion profit before tax from N3.19 billion profit before tax reported in 2021 financial year. With tax expenses of N3.31billion, PZ Cusson Nigeria reported profit of N6.7 billion profit in 2022 from N1.78billion reported in 2021.

Increasing trade and other payables

PZ Cusson Nigeria in 2022 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 N57.89billion in 2022 from N43.74billion in 2021, the Group current liabilities rose by 35.4 per cent to N62.3billion in 2022 from N46billion in 2021.

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

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