PZ Cussons issued a trading update for the year ended May 31, 2012, confirming that performance since the last trading update has been in line with expectations.
As previously indicated, profits before exceptional items for the year are expected to be approximately 15% lower than the previous year. This reflects a robust performance in the U.K., strong trading in the beauty division and positive momentum in Indonesia, more than offset by the impact of three previously identified factors: approximately £25 million of increased costs from the significant year-on-year raw material cost inflation; a worsening trading environment in the Australian home care category; and the well-publicized social and economic tensions in Nigeria. The major supply chain optimization project, announced in March, is on track and the benefits will begin to be seen in the new financial year.
Overall, despite the uncertainty in certain key markets, the company remains confident that it will return to profitable growth in the new financial year.
Specifically in Europe, the U.K. washing and bathing division has produced a robust performance, despite challenging retail trading conditions as a result of the promotional environment and weak consumer demand. The company's focus on brand innovation and renovation across the portfolio of Imperial Leather, Carex and Original Source continues, and PZ Cussons also is pleased to announce the launch of a new brand, Cussons Mum & Me, a range of personal care products specifically designed for mothers and babies. The range caters for the three life stages of bump, new mum and baby, and will be available in full U.K. national distribution by the end of July.
The beauty division has continued to perform well both in the U.K. and overseas, with particularly strong growth from St. Tropez in the U.S. An exciting development for the Sanctuary brand is this month’s launch of a new range of skin care products called Active Reverse, with ballet star Darcey Bussell as a brand ambassador. The Fudge hair care brand, acquired in January, has performed well post acquisition with its integration into the division now complete. Also, trading in Poland has been strong while the trading environment in Greece remains extremely difficult due to the challenging political and economic environment.
For Asia, the positive momentum in Indonesia has continued with further growth in revenue and profitability. The market-leading Cussons Baby range has continued to grow through portfolio improvements and distribution expansion. As previously advised, the trading environment in the Australian home care category worsened during the year, resulting in a 25% reduction in revenue and lower margins, and measures to address the underperformance of the Australian business are being successfully implemented with operating results improving on a monthly basis.
In Africa, the company reports that Nigeria saw strong revenue growth in the first half as a result of positive momentum following the elections last year. However, the national strike in January, the social instability in the North, and reduced consumer spending power following the removal of part of the fuel duty subsidy, combined to result in broadly flat revenue performance during the second half of the financial year. Also, construction of the palm oil refinery with Wilmar is on track with completion due by the end of the calendar year.
Across the company, the focus remains on driving revenue growth through brand innovation and renovation, while reducing costs through margin improvement initiatives. The major supply chain optimization project is on track to significantly reduce the overhead footprint of the company’s manufacturing activities, and the benefits will begin to be seen in the new financial year.