PZ Cussons Announces Half Year Trading Update

In a trading update announcement regarding its financial results for the half year to November 30, 2012, PZ Cussons Plc found the overall performance of the company was in line with management expectations—revenue was broadly flat, mainly as a result of difficult trading conditions in Nigeria. However, profits increased by approximately 10% versus the comparative period, driven in particular by an improvement in the profitability of the company’s Australian business and a robust performance in the U.K.

In PZ Cussons’ U.K. washing and bathing division, the core brands performed well with an increase in profitability versus the prior period despite continued high levels of promotional activity in the trade. Notably, profitability in the company’s European beauty division is also ahead of the prior period. While St. Tropez was adversely affected by the poor summer, Sanctuary performed well, benefiting from the launch of the new Active reverse skin care range with ballet star Darcey Bussell as brand ambassador. And the Fudge hair care brand also performed well with a new Fudge.com e-commerce site launched toward the end of the period. Also, performance in Poland was robust with revenue and profit ahead of the prior period while revenue and profitability in Greece are lower as a result of the domestic economic situation.

For the Asia-Pacific region, trading conditions in Australia remain challenging. However, the measures taken to improve the performance of the business there been successfully implemented, with a production facility closed as part of a move to a variable cost model, helping the business return to profitability in the period. Continued positive momentum in Indonesia delivered another period of revenue and profit growth largely from the market-leading Cussons Baby range there, and trading in the smaller territories of Thailand and the Middle East was in line with expectations.

For Africa, Nigeria saw sales rates during the period affected by social unrest in the north of the country, flooding in a large number of states, and the general impact on consumer disposable income as a result of the removal of part of the fuel subsidy earlier in the year. As a result, revenue is slightly lower than the prior period although margins in home and personal care are improving as a result of lower raw material costs and margin improvement projects. Construction of the palm oil refinery with Wilmar in Nigeria is almost complete with commissioning of the facility due to commence in December 2012, and sales of consumer products under a new brand are expected to begin before the end of the financial year. Additionally, performance in the smaller territories of Ghana and Kenya has been in line with expectations.

Regarding a full-year outlook, PZ Cussons noted that trading conditions in most markets remain challenging with continued pressures on consumer disposable income. The situation in the company’s important Nigerian market continues to be fragile although the longer-term opportunity remains exciting. PZ Cussons’ focus remains on new product development and further margin improvement. Raw material cost trends are expected to be favorable in the coming year and the benefits of a supply chain optimization project are also beginning to be seen.

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