Fast Moving Consumer Goods (FMCG) player, PZ Cussons, has unveiled plans to increase its investments in the agricultural sector, specifically oil palm. Chief Executive Officer (CEO) of the firm, Christos Giannopoulos, disclosed this at a parley in Lagos.
The company’s agricultural venture is in partnership with Malaysian oil giant, Wilmar International Limited.
The firm has spent over N65 billion across the country. A N20 billion Oil Palm refinery was built in Lagos State. In addition, it had acquired the Calaro oil palm plantation previously owned by the Cross River State government. Other investments in the state include plantations at Ibad and Akamkpa.
About N45 billion will be spent on the next phase, mostly on oil palm plantations, the Nation reported.
Others in the race
PZ’s competitors in the space are also not resting on their oars. Okomu Oil, in its 2017 annual report, stated its intention to plant about 2000 hectares of palm in 2018. The company has also placed orders for two oil palm mills, with an expected delivery date of 2020.
Presco has set a target of planting 4000 hectares of palm oil at its Sakponba plantation yearly.
Why the move?
Demand for crude palm oil far outstrips supply despite the increased capacity. A ban by the Central Bank of Nigeria (CBN) on the importation of palm oil led to an increase in local demand. Aside from the demand for domestic use, refined palm oil is also used in the production of soap and margarine.
Significant demand also exists outside the country, providing foreign exchange revenue for these firms.
The President Muhammadu Buhari administration has also taken agricultural self-sufficiency as a key agenda.
For PZ, its investments in the agricultural sector are a form of backward integration for some of its products and a buffer as some of its other segments struggle.
While its full-year 2017 profits of N3.3 billion was a massive improvement from 2016, it is one of the lowest it has made in the last 5 years.
PZ’s UK parent, this week, issued a profit warning (the second this year) in respect of its forecast profit, according to Reuters. It stated that it was witnessing pressure in price, volume, and margins across most of its Nigerian portfolio, despite the country’s recovery from recession in 2017.
2015/2016 was marked by difficulties in accessing foreign exchange due to a crude oil price slump, which led to a devaluation of the Naira. Growth, however, remains weak.
Recent GDP figures released by the National Bureau of Statistics (NBS) shows growth slowed for the first time since the recovery from the recession, dropping from 2.11% in the fourth quarter of 2017 to 1.95% in the first quarter of 2018.
PZ Cussons closed at N20.75 on Thursday’s trading session on the floor of the NSE. Year-to-date, the stock is up 0.73%.
Results for the 9 months ended February 2018 show revenue increased from N57.1 billion in 2017 to N63.2 billion in 2018.
Profit before tax dropped from N2.3 billion in 2017 to N1.9 billion in 2018. Profit after tax also slipped from N1.6 billion in 2017 to N1.3 billion in 2018.
The company markets several products including popular brands, Premier Soap, Robb menthol, Nunu Milk. Others include Mamador cooking oil and the Haier Thermocool range of electronics.