Its 1950s ads interrupting broadcasts of much-loved TV shows helped popularise the phrase “soap opera.” These days PZ Cussons is caught up in a drama all of its own, with setbacks in two key markets sending the shares tumbling as much as 28% on Thursday.
The maker of Imperial Leather soap had its worst decline on record in London trading after PZ Cussons forecast profit before tax for this year of £80-£85 million, lower than the average £98.5 million estimated by analysts in a Bloomberg survey.
It’s the second time the Manchester-based company has disappointed the market in 2018, after saying in January that it faced tough trading conditions in several markets in the first six months of the fiscal year while adding that it expects business to pick up in the second half.
The stock is among the 10 worst performers on the FTSE 250 Index this year.
Increased Competition
“The UK washing and bathing division has continued to experience lower levels of purchases reflecting consumer caution across all retail channels,” PZ Cussons said in a statement.
“Whilst new product launches have been well received, they have not had the desired uplift in sales to compensate for the wider volume and margin shortfall.”
Meanwhile, sales in Nigeria were hit by increased competition, particularly for its milk and yogurt-based drinks, as consumer spending remained under pressure in that market. PZ Cussons generated about 38% of its sales from Africa in the last fiscal year, according to data compiled by Bloomberg.
PZ Cussons, which traces its history back to a perfumery on London’s Bond Street 220 years ago, is now reassessing its operating structure, reviewing product costs and the milk business in Nigeria while whittling down its new product pipeline.
The company was formed by the merger of Cussons Sons & Co. and Sierra Leone-based Paterson and Zochonis in 1975.
“We remain prudent,” Investec analyst Nicola Mallard wrote in a note, lowering her price target for the stock to 309 pence from 374 pence, while maintaining a buy recommendation. “It remains difficult to predict the extent/timing of any recovery, especially in Africa.”
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