The British soap and shampoo maker announced the challenging remainder to the year, following results for its January 26-April 13 period, and the expected disruption in trading until the end of its financial year on May 31.
“Given our concerns over European consumer markets and the short term impact on Nigerian trading we maintain our Hold recommendation and lower our price target from 365p to 345p,” PZ Cussons concluded.
However, PZ Cussons did announce that it expects Asia and Nigeria to contribute to growth in what looks like an encouraging next financial year.
Disruptions to trading for FY2011
“In light of the temporary disruption to trading in Nigeria and the ongoing challenges of weak European consumer markets and higher input costs we feel it prudent to reduce our EBITA forecasts for Europe by £2m in both FY 2011 and FY 2012 and in Africa by £3m in FY 2011 and by £1m FY 2012,” the company said in a statement.
The personal care company explained the consumer environment in the UK remains challenging due to ongoing high levels of both promotional activity and input costs, particularly within the mass market segments of shower gels and handwash.
Nigeria is usually a strong market for PZ Cussons, and it explained that the disruption to trading due to the elections has been exacerbated by a delay in the start of the process.
Given that this is peak trading season in Nigeria, the disruption creates a disproportionate impact on sales, although PZ Cussons view this as a temporary situation and highlights that underlying trading in Nigeria seems to be improving as consumer concerns ease.
Encouraging outlook for next year
The UK-based firm expects normal trading conditions to resume in due course after the completion of the elections, barring any surprises.
It also believes the beauty market in the UK to improve over time, with premium brands expected to deliver good growth in the next financial year.
Also expected to deliver growth in FY2012 is Asia, where performance remains strong and in particular in Indonesia, where the re-launch of Cussons Baby is driving profitable growth but the company does highlight a tightening of the consumer environment in Australia.