PZ Cussons Nigeria Plc, the dynamic consumer products group, has released its year-end audited financial report for the period ended 31 May 2020. The results revealed that the group suffered a pre-tax loss amounting to N7.984 billion.
According to the figures contained in the audited financial report, the group’s financial performance for the year is unimpressive when compared with the N1.942 billion pre-tax profit the company reported in 2019.
- Revenue decreased by 9.879%
- Cost of sales increased by 1.984%
- Exchange loss increased by 112.899%
- Bottom line decreased by 511.066%
Facts behind the loss
A review of PZ audited annual financial report revealed that the decline in revenue which spiked the pre-tax loss of N7.984 billion came from the 17.5% fall in the sale of Home and Personal Care Products, which is the core business segment of the group.
However, in the light of the figures contained in the reports, Nairametrics was able to uncover that the sales of the company’s products, which include products such as Morning Fresh, Zip, Canoe, Premier, Joy, Stella, Venus, Imperial Leather, Cussons Baby, Carex, Robb etc., declined in 2020, compared to the sales from this segment in the corresponding period of 2019.
On the flip side, revenue from the sales of Durable Electrical appliances increased from N27.136 billion in 2019 to N28.053 billion in 2020.
Other downward pressures on profitability
The group’s prospect for profitability for the financial year 2020 was eroded by Selling and distribution expenses of N10.214 billion, and Administrative expenses of N5.477 billion. However, these expenses completely eroded the Gross Profit of N8.622 billion to the tune of N7.069 billion operating loss.
However, the N7.069 billion operating loss was compounded by an Exchange loss of N945.86 million, and an interest cost of N454.234 million, this drove the group’s pre-tax loss to the tune of N7.984 billion.
Key issues facing the group
Apart from the pressures from competitors which has led to the commoditization of some of the products in the core business segment of the group, the group’s activities are exposed to the financial risks from the fall in the international value of naira “the exchange rates”.
However, PZ manages foreign exchange forward contracts but it is primarily exposed to the US dollar as a 15% decrease in the value of Naira would lead to a decrease in profitability and the total equity of PZ Cussons.