PZ Cussons’ Loss Multiplies in Q3
PZ Cussons was down by N1.6 billion loss at the close of its half-year operations in November 2019. Rather than moving up, the consumer goods and marketing firm fell deeper into N3.5 billion loss at the end of its third-quarter in February 2020 raising doubts about its ability to step up sales revenue growth and create room for profit in the second half of its financial year.
Now, investors are worried that the strength to accomplish that remained far-fetched at the end of the third quarter especially with the big hole in the books of the company.
The consumer goods manufacturing and marketing company continued losing sales revenue for the second financial year in the third quarter though a decline at half-year improved to a slip in the third quarter. That has improved the full-year sales revenue outlook that could step up to a marginal increase at full year.
The company suffered a profit drop for the second year in 2019, which continues to worsen into rising losses from quarter to quarter. The loss figure at the end of the third quarter is already more than the profits of the preceding two years put together. That is eating up retained earnings and the equity base of the company.
The company’s cost-income structure remained out of balance with no room for profit. Costs continued to grow generally against flat sales revenue. Input cost and selling/distribution expenses remained major challenges to the company’s management. Input cost claimed an increased proportion of turnover and selling/distribution cost consumed 93 percent of gross profit.
The developments caused a drop of 33 percent in gross profit indicating that the cost of generating a naira of sales revenue remains relatively high for PZ Cussons. That has eaten up profit margin further and raised loss margin instead.
Selling/distribution cost contributed much to the doubling of the loss figure in the third quarter. It closed flat at the end of the third quarter at N7.9 billion compared to a 10 percent drop at the end of half-year. That further extended the existing pressure of 32 percent growth in administrative expenses during the period.
The outcome is a big operating loss of N2.4 billion in the third quarter alone compared to N1.5 billion operating loss for the first two quarters of the year. This is a deep plunge from an operating profit of N1.3 billion in the same period last year. Over one and half times jump in operating loss to N3.9 billion between the second and the third quarter is the cause of the swelling of the loss figure in the third quarter.
PZ Cussons closed the third quarter operations in February 2020 with a turnover of N54.7 billion, slightly down from N55 billion posted in the same period in the preceding financial year. This represents a slight improvement from a decline of 3.2 percent in turnover at the end of half-year. The company lost roughly 8 percent of sales revenue in the preceding financial year but a marginal improvement looks possible for it this financial year ending May 2020.
Based on the slight upbeat in sales in the third quarter, turnover projection is revised from N69 billion to N76 billion for PZ Cussons for the 2020 financial year. That will still be below its sales revenue figure in 2017.
PZ Cussons produces and sells a wide range of consumer products and home appliances that face stiff competition in the marketplace. These include detergent, soap, cosmetics, refrigerators, air conditioners among others.
The company faces difficulties in both selling and producing fronts. Input cost grew by 9 percent year-on-year to over N46 billion at the end of the third quarter, extending from 7 percent increase at half-year. This is against the slight decline in sales revenue during the period. The cost of sales, therefore, consumed 84 percent of sales revenue, rising from less than 77 percent in the same period in the preceding financial year.
The cost margin, therefore, grew further in the third quarter from the half-year position. It represents a sustaining increase from 69.5 percent in 2018 and 77 percent at the end of the 2019 financial year. Gross profit, therefore, fell by 33 percent to N8.4 billion at the end of the third quarter operations after dropping by 30 percent at the end of the 2019 financial year.
Operating results crashed further into a loss of N3.9 billion at the end of the third quarter, growing more than one and half times from N1.5 billion at the end of the second quarter and a 392 percent drop from an operating profit of N1.3 billion in the same period last year.
Other significant developments include over 98 percent upsurge in interest expenses that caused a shift from net finance income to net finance cost position. A foreign exchange loss of N127 million was however a drop of 74 percent year-on-year.
PZ Cussons closed the third quarter operations with a net loss of N3.5 billion against an after-tax profit of N807 million in the same period in the preceding year. The full-year outlook indicates further swelling of the loss figure in the final quarter.
The company lost 89 kobo per share at the end of the third quarter operations, down from earnings per share of 20 kobo per share in the same period in the prior financial year. The loss has erased nearly N4 billion equity capital of the company.
Comments are closed.