The gradual reopening of the economy after a long hiatus for the government lockdown policy to be lifted and the roll- 0ut of vaccines is a boon for PZ Cussons Nigeria Plc as the consumer goods giant returned to profitability.
The maker of Imperial Leather soap had faced strong headwinds as rising unemployment and deteriorating consumer disposable income were undermining growth.
There were challenges due to significant disruption being faced in clearing goods at the port and the incessant devaluation of the currency that stokes imported inflation.
PZ Cussons Nigeria posted net income of N1.83 billion for the fourth quarter ended May 2021, from a loss position of N7.24 billion as at the year ended May 2020.
Revenue spiked by 23.15 percent to N82.38 billion in the period under review from N67 billion the previous year.
Despite the infrastructure bottleneck and foreign exchange scarcity spurring input costs of manufactures, its cost of sales increased by a mere 1.20 percent to N59.08 billion, which is much lower than the 17.10 percent May’s inflation figure.
A strong revenue growth and cost containment are responsible for margin expansions.
The consumer goods giant is able to turn each Naira invested in sales into higher profit as it utilized the resources of its owners in generating higher profit.
Gross profit surged by 170.12 percent to N23.95 billion in the year ended May 2021 from N8.62 billion the previous year. Gross profit margin increased to 28.27 percent in the period under review from 12.86 percent the previous year.
The company posted operating profit of N6.97 billion as at the year ended May 2021 from a loss of N7.06 billion the previous year.
Analysts are of the view that the company could maintain the current growth momentum if the government formulates policies that will help remove infrastructure bottlenecks and underpin the flow of foreign exchange into the market so that manufacturers can seamlessly import raw materials and equipment.
Also, an improvement in macroeconomic indices in the last two quarters means the relaxation of social distancing measures that accelerated consumption means there is light at the end of the tunnel for entities.
The manufacturing sector exited three consecutive quarters of decline as it grew 3.40 percent in the first quarter of 2021, from a negative figure of 1.51 percent in the last quarter of 2020, and the first quarterly growth since first quarter of 2018, according to data from the National Bureau of Statistics (NBS).
Nigeria’s economy grew by 0.51 percent year on year (y/y) in the first quarter (Q1-21 ), as the non-oil sector continued to drive the overall economic performance amid a slower decline in the oil sector, according to NBS Data.
Nigeria’s inflation rate dropped further for the second consecutive month to stand at 17.93% in May 2021 from 18.12% recorded in April 2021.