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PZ Cussons Plc issued a trading update for its year ended May 31, 2014. The board is pleased to announce the performance of the company has been in line with management expectations, with “sterling” profits for the year expected to be approximately 6% higher than the previous year. This result has been achieved despite a significant exchange impact of approximately £12 million from the translation and transactional effect of weakening currencies. Excluding this impact, profits would have been 17% higher than the previous year. The financial position of PZ Cussons remains strong, with good cash generation and only a small net debt position at the year end.
For Europe, in the U.K. washing and bathing division, Imperial Leather, Carex and Original Source have performed well driven by a significant renovation and innovation program, and the Cussons Mum & Me range is growing well together with new products under the Little Explorers sub-brand. In the beauty division for Europe, consumer demand for St. Tropez has been boosted by Kate Moss as brand ambassador. Also, the Sanctuary, Charles Worthington and Fudge brands have performed well in the U.K. and have secured new overseas distribution. In Poland, following the sale of the home care brands in February for £46.6 million in cash, the focus is now on investing in and growing the personal care brands of Luksja, Original Source and Carex And performance in Greece has continued to show some improvement as the economy begins to stabilize.
For the Asia region, while profitability in Australia has been affected by the weaker Australian dollar, the core brands of Morning Fresh and Radiant have performed well. Rafferty's Garden has seen a number of new product launches and the international expansion will begin to be executed before the end of the calendar year. Continued positive momentum in Indonesia has delivered another year of revenue growth although a weaker rupiah has impacted profits. Growth has been achieved across both the baby care and non-baby care portfolios as well as continued progress being made with distribution in other South East Asian territories. Overall trading in the smaller territories of Thailand and the Middle East has been broadly in line with expectations.
In Nigeria, for the company’s Africa business, unrest in the north of the country has continued with increased levels of disruption over recent months. Economically, interest rates have been maintained at a high level reducing levels of liquidity in the trade. The naira has remained stable versus the U.S. dollar, despite coming under pressure ahead of a change in the central bank governor. In personal care and home care, while commodity products have had to trade in an extremely competitive environment, growth has been achieved in the value add portfolio driven by a significant brand renovation program. Good growth has been achieved in the electricals business as well as in Nutricima, the nutritional beverage JV with Glanbia. And the palm oil joint venture with Wilmar has performed very well with the refinery already operating towards capacity and ahead of expectations. Good growth has been achieved in the consumer brands of Mamador and Devon Kings with the balance of output sold business to business. Profitability in Ghana continues to be impacted by further weakening in the cedi. Kenya has performed well and in line with expectations.
For its outlook, PZ Cussons reports that while trading conditions in most markets remain challenging, the company remains focused on a dynamic and fast brand renovation and innovation program, an ongoing cost reduction program and successful delivery of new areas of growth such as Rafferty's Garden and the Wilmar joint venture. These initiatives will help to offset the continuing macro challenges and the reduction in profits from Poland as a result of the homecare sale. The company’s balance sheet remains strong and well placed to pursue new areas of growth.