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PZ Cussons Marks a Return to Profitable Growth

Posted: July 23, 2013

PZ Cussons Plc announcesd its preliminary results for the year ended May 31, 2013. Reported revenue results were £883.2 million, a 2.8% increase over the reported revenue results for the year ended May 31, 2102 (£858.9 million). This also represented a return to profitable growth with a 16% increase in operating profits to £108.4 million, as revenue and profit grew in all regions of Africa, Asia and Europe for the company.

Commenting on the results, PZ Cussons' chairman Richard Harvey said, "The group has delivered on its expectations and returned to profitable growth. Growth came from all regions of Europe, Asia and Africa and in particular from the key markets of U.K., Indonesia and Nigeria. This has been achieved despite challenging external factors such as the difficult trading environment in Europe, high wage inflation in Indonesia and the continuing unrest in the north of Nigeria.

"The group's entrepreneurial ability to bring new products to market quickly gives us a competitive advantage and the ability to maintain or increase our leading market shares in our chosen geographies and markets. At the same time, we have maintained our focus on cost reduction, both through the supply chain optimization project, which is almost complete, and other margin improvement projects throughout the group, resulting in overall operating margins now exceeding 12%.

"The joint venture with Wilmar in Nigeria has considerable potential and a new consumer brand has its launch planned for the first quarter following the successful commissioning of the palm oil refinery earlier in the year. We ended the year with a net cash position, as a result of the strong cash generation during the period.

"Despite the challenging trading conditions in most markets, the group expects to deliver continued increases in profitability and cashflow driven by brand innovation and renovation, as well as further margin improvement projects. Overall performance since the year-end has been in line with expectations," he concluded.

As previously noted, operating profits increased 16.1% for PZ Cussons, versus the prior year driven by revenue growth of 2.8%, a return to profit of the Australian business, lower raw material costs and margin improvement initiatives. This increase was achieved despite tough trading conditions and fragile consumer sentiment in Europe, high wage inflation in Indonesia and continuing unrest in the north of Nigeria. In addition, launch costs of the new Cussons Mum & Me brand were incurred during the year together with start-up costs relating to the joint venture with Wilmar.

Within Africa, Nigeria continues to represent over 80% of revenue and operating profits with the balance coming from the businesses in Ghana and Kenya. Revenues in the first half of the year in Nigeria were slightly lower year on year due to consumers adjusting to higher fuel prices, severe flooding in large parts of the country and the impact of unrest in the north. During the second half, while trade in the north continued to be difficult, the trading environment in the south was more robust resulting in revenue growth year on year, and therefore for the full year an overall flat revenue position. Full-year operating profits for Africa increased 11.6% as a result of improved margins from margin improvement projects and lower raw material costs, and against a prior year, which included the negative effects of the nationwide general strike that took place in January 2012.

The increase in Asia revenues was predominantly from Indonesia, which marked another consecutive year of double-digit growth. The significant increase in Asia profits came from Australia, which returned to profitability from a loss position last year. This was achieved by restructuring the business including closing the manufacturing facility to move to a variable cost model.

Revenues and operating profits in Europe were higher despite tough trading conditions. Growth was achieved in both the U.K. and Poland, while revenue in Greece was lower due to the macroeconomic situation. The launch costs of Cussons Mum & Me were incurred in the U.K. during the year as well.

Find full results from PZ Cussons' year ended May 31, 2013, financial report here.