Nigeria unrest prompts PZ Cussons warning

A slowdown in Nigerian sales growth linked to violence in the north of the country and a cut in fuel subsidy has prompted PZ Cussons to issue a profit warning.

Shares in the consumer products maker fell as much as 11 per cent on Tuesday after it said the setbacks in Nigeria, its largest market, would leave its financial performance for the current financial year “some way below expectations”.

Panmure Gordon, one of Cussons’ brokers, cut its forecast for underlying pre-tax profit for the current financial year, which runs until the end of May, from £102m to £89.1m, a fall of 13 per cent.

Analysts had already cut their full-year profit forecasts for Cussons, which makes Imperial Leather soap, after it gave warning in January that the trading environment in Nigeria may worsen.

Brandon Leigh, Cussons’ finance director, on Tuesday said the group’s year-on-year sales growth in the country had been 20 per cent in the first half of the financial year. However, in the second half so far, sales had been flat.

Nigeria has been hit by a wave of bombings and other violence, particularly in the north. The government’s partial withdrawal of a fuel subsidy – a move that sparked a nationwide strike in January – has also hit consumer spending, Cussons said.

In addition to the sales drag, Cussons said costs had also increased in Nigeria, with hauliers now having to pay more for petrol, for instance. However, Mr Leigh said the fuel subsidy cut would benefit the Nigerian economy in the medium term.

Cussons said trading in the rest of its business had been in line with management expectations in the two months to March 26, although it also announced a restructuring of its supply chain that would lead to £39m of exceptional charges.

It said it expected to return to profitable growth in all countries, including Nigeria, in the coming financial year.

Shares in Cussons fell 9 per cent to 302.5p in early morning trading in London on Tuesday.