PZ Cusson’s result reflects vulnerability to nationwide lockdown, say FBNQuest analysts

NI G E R I A N AFFILIATE OF UNITED KINGDOM’S fast moving consumer goods company, PZ Cussons, unaudited result for the first quarter of its 2020/21 financial year, recently released by the company, reflects its vulnerability to the nationwide lockdown which began in April, analysts at FBN Quest Capital Research have suggested in a note seen by Business A.M.

The analysts, peering into the results, observed that the unadjusted losses by the company for the period Q1 20/21 will make a greater impression on the market and fuel bearish sentiments on the company’s shares.

“PZ made pretax losses in both quarters. Q4 2020 earnings were particularly reflective of PZ’s vulnerability to the lockdown that commenced early April. The loss of -N4.0bn compares with Q4 2019 profit before tax (PBT) of N1 billion and our pretax loss forecast of -N1.1 billion. We, however, see the unadjusted losses for both periods making a greater impression on the market and fuelling bearish sentiments on PZ shares,” the analysts posited.

PZ Cussons Nigeria had on Monday filed its unaudited financial statement for the first quarter ended 2020/21 to the Nigerian Stock Exchange showing Q1 2021 sales up 18 per cent year on year. This was the chief driver behind the strong growth and the positive surprise in the adjusted PBT.

But FBN Quest analysts commented that “the Q4 earnings miss was as a result of -26 per cent lowerthan-forecast sales and 2.2x higher-than-forecast foreign exchange loss,” adding that, “for Q1 2021, PZ’s underlying performance was stronger than anticipated. However, the company reported a foreign exchange loss of -N1.1 billion. As such, pretax loss of -N212 million missed our forecast by 25 per cent. Stripping out the foreign exchange loss, adjusted PBT of N840 million was a marked improvement from the Q1 2020 loss of -N1.1 billion and was well above our loss forecast of -N170 million.”

The further opined that, besides operating expenses, “all key line items in Q4 2020 disappointed,” and that the -N1.1 billion foreign exchange loss and a 19 per cent operating expenses miss were the key negatives in Q1 2021. They noted that year-to-date, PZ shares have shed 29.2 per cent; underperforming the broad index by 29.7 per cent.

The company reported revenue of N18.7 billion with gross profit of N4.89 billion for the period ended Q1 2020/21, representing 18.3 per cent and 80.2 per cent increases from the figure recorded in the previous reporting period Q1 2019/2020.