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PZ Cussons Reports 2011 Six-Month Financial Results

Posted: February 7, 2012

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On Jan. 5, 2012, PZ Cussons exchanged contracts for the acquisition, through its beauty division, of the Fudge hair care brand. Completion took place on Jan. 24, 2012, with the brand and associated inventory acquired for £25.5 million in cash. Sold predominantly through salon distribution in the U.K., Australia and New Zealand, Fudge will join the portfolio of brands within PZ Cussons Beauty, the group’s recently formed beauty division, which currently comprises St Tropez, Sanctuary and Charles Worthington. Revenue for the Fudge brand for the year ended June 30, 2011, was £15.7 million with approximately 50% of sales in the U.K. and Europe and 50% in Australia and New Zealand.

Regionally, the company’s Africa division saw Nigeria’s revenue growth as strong following elections earlier in the year, and growth has been achieved in all business units of personal care, home care, electricals and nutrition. Within personal care, brands performing particularly strongly included Premier, Joy and Canoe soaps. Margins have, however, been impacted by high raw material costs with levels equivalent or higher to those experienced during the second half of last year. During the period, the Group’s holding in its listed Nigerian subsidiary has been increased further from 66.8% to 67.4% at a cost of £2.8 million. Toward the end of the period, increasing tensions around fiscal reform resulting in civil disruption began to affect the country. Also revenue and profit in Ghana and Kenya are ahead of the same period last year.

The company’s Asia division continued positive momentum in Indonesia, which has delivered another period of revenue and profit growth largely from the market leading Cussons Baby range. During the period, the brand broadened its customer base through expansion into new distribution channels. In Australia, revenue is lower than the prior period due to competitive trading conditions in the retailers, which have resulted in reduced listings and shelf space and higher levels of promotional activity as well as increased competition from private label products and discount stores. Consequently, reduced revenue against a strong comparative in the first half of last year, together with higher raw material costs, have resulted in a loss in the period. Revenue in Thailand was lower as a result of disruption to sales caused by the recent flooding resulting in a loss for the period whilst results in the Middle East were also adversely affected by social and political unrest in that region.

In Europe, the UK washing and bathing division has experienced good revenue growth despite worsening consumer confidence although continued high levels of promotional activity in the retailers and high raw material prices have impacted margins. New product launches in the period have been well received and the newly formed Beauty division, created to bring the premium beauty brands of Sanctuary, Charles Worthington and St Tropez together under one strategic umbrella, has performed well with an increase in revenue and profit despite tougher trading conditions in all U.K. distribution channels. New product launches have been successful and international expansion of the product range, particularly of St Tropez in the U.S. and Australia, is progressing well. Performance in Poland has been robust with revenue and profit ahead of the prior period with both fabric care and personal care performing well. In Greece, the economic environment has resulted in trading conditions remaining difficult, although a small increase in profit for the period was achieved.

Post period end, two events have affected Nigeria, PZ Cussons’ largest market. First, social instability over the Christmas period led to a state of emergency being declared in a number of northern states, which has impacted sales in those areas. Second, the removal of the fuel duty subsidy led to civil disruption during January and a week-long national strike, which affected production in all factories and sales on a national level, during what is a peak trading period. While the strike has now ended and the fuel subsidies have been partially reintroduced, continued social instability in the north together with ongoing fiscal reforms may create further unrest in the balance of year.