February 9, 2024/CSL Research

In its H1 2024 (6M ended November-2023) earnings result, PZ Cussons Plc. (PZ) recorded Revenue growth of 18.9% y/y to N68.09bn from N57.26bn in H1 2023. Q/q, PZ’s Revenue grew 19.1% y/y to N37.02bn Q2 2024 from N31.07bn in Q1 2024.

The company’s cost of sales (adjusted for depreciation) was up by 5.9% y/y to N45.51bn in the period from N42.96bn in H1 2023. Consequently, its Gross profit grew to N22.56bn in H1 2024 from N14.30bn in H1 2023 bringing the company’s Gross profit margin to 33.2% in H1 2024 from 25.0% in H1 2023.

PZ’s Total Operating Expense (adjusted for depreciation) advanced by 30% to N11.60bn in H1 2024 from N8.92bn in H1 2023, largely driven by the 15.4% y/y rise in Marketing and Administrative Expenses to N6.67bn in H1 2024 from N5.78bn in H1 2023. Its Selling and Distribution Expenses also rose significantly, up 57.0% y/y to N4.94bn in H1 2024 from N3.15bn in H1 2023. Consequently, OPEX Margin was up by 1.1ppt to 16.9% in H1 2024 from 15.8% in H1 2023

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Source: Company data, CSL Research

PZ’s writeback on trade receivables rose to N122m in H1 2024 from an impairment of N112m in H1 2023. The company’s Exchange Loss of N87.08bn in H1 2024 compared with a N2.71bn Loss in H1 2023 weighed heavily on the EBITDA bringing it to a loss of N75.98bn in H1 2024 from a gain of N2.56bn in H1 2023. Depreciation and amortization declined marginally to N1.04bn in H1 2024 from N1.06bn in H1 2023, bringing the company’s Operating Loss to N77.02bn in H1 2024 from a gain of N1.50bn in H1 2023. The company’s Other Income plunged to N154m in H1 2024 from N6.10bn in H1 2023.

The company recorded a 148.5% increase in Interest Income to N4.20bn in H1 2024 from N1.69bn in H1 2023 while its Interest Expense advanced to N1.14bn in H1 2024 from N5.02m in H1 2023 bringing its Net Finance Income to N3.07bn in H1 2024 from N1.69bn in H1 2023.

Despite its Net Finance Income, the company’s high Exchange Loss and low other income of only N154m resulted in a Loss Before Tax to of N73.8bn from a profit of N7.67bn in H1 2023 while its Loss After Tax came in at N74.14bn in H1 2024 from a Net Profit of N7.67bn in H1 2023.

We retain our price target of N24.70/s with a Sell recommendation. Current Price: N30.90/s

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