PZ Cussons Plc has overcome the dollar scarcity causing menacing pains to manufacturers in Africa’s largest economy as earnings surged, but the soap-maker still has to contend with soaring inflation and weak consumer demand.
For the year ended May 2022, PZ Cussons’ net income surged by 278.69 percent to N6.40 billion from N1.19 billion the previous year.
Operating profits, which measures the ability of a company to generate profit from operations, surged by 170.20 percent to N170.20 billion as at year end May 2022.
Additionally, analysis by MoneyCentral shows growth at the bottom-line was largely driven by net Profit realised – Disposal and impairment of fixed assets- which spiked by 165.76 percent to N5.90 billion.
PZ Cussons was efficient at using its labor and supplies in producing goods or services, while it was able to turn each Naira invested in sales by owners of the business into higher profit.
Earnings before interest, taxation, depreciation, and amortization, (EBITDA) margin moved to 10.90 percent in the period under review from 7.20 percent the previous year.
Net profit margin, another measure of profitability and efficiency, increased to 6.40 percent as at year end May 2022 from 2.10 percent the previous year.
The stellar performance and best results in seven years places the company in an advantageous position to woo more investors with the payment of dividend.
Trade and other receivables dipped by 52.10 percent to N7.14 billion in the period under review, thanks to the adoption of a stringent credit policy and efficient working capital management.
It must be noted that PZ Cussons was hard hit by the foreign exchange scarcity of 2016 brought on by the precipitous drop in crude oil price of mid-2014.
The business environment for the fast-moving consumer goods sector has been extremely challenging.
These firms sailed into the storm in 2020 when the coronavirus pandemic forced the government to impose a lockdown measure that paralyzed business activities and significantly disrupted the supply and demand side of the market.
However, the re-opening of the economy underpinned by the successful roll-out of vaccines led to the sustained recovery in local demand.
Analysis of the Q1 2022 GDP report showed that the manufacturing sector sustained the positive trend seen in the past four consecutive quarters, rising by 5.89% in Q1 2022 from 2.28% y/y in Q4 2021 and 3.40% y/y in Q1 2021.
The Nigerian economy expanded by 3.1 percent y/y in real terms in what was broadly a positive surprise as the growth print topped consensus expectations even amid unprecedented developments in the global economic environment including rising inflationary pressure, higher importation costs (due disruption in the global supply chain), and geo-political uncertainties.
PZ Cussons and peer rivals are beset by elevated cost of diesel that has left them scratching their heads because it is difficult to pass on the cost to consumers who are reeling from huge utility bills, escalating transport fares, and high unemployment rates.
The World Bank has said that fuel shortage and rising inflation will likely restrain economic growth in Nigeria.