April 4, 2024/CSL Research

In its 9M 2024 (9M ended in February 2024) earnings result, PZ Cussons Plc. (PZ) recorded Revenue growth of 27.2% y/y to N110.63bn from N87.00bn in 9M 2023. Q/q PZ’s Revenue grew 14.9% y/y to N42.54bn Q3 2024 from N37.02bn in Q2 2024. The company’s Cost of Sales (adjusted for depreciation) was up by 15.0% y/y to N71.63bn in the period from N62.28bn in 9M 2023. Consequently, its Gross Profit increased to N39.00bn in 9M 2024 from N24.71bn in 9M 2023 bringing the company’s Gross Profit margin to 35.3% in 9M 2024 from 28.4% in 9M 2023. PZ’s total Operating Expense (adjusted for depreciation) was down by 25.4% to N10.02bn in 9M 2024 from N13.41bn in 9M 2023 leading to an OPEX Margin of 8.9% in 9M 2024 from 15.6% in 9M 2023.

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PZ’s reported Writeback on Trade Receivables of N143m in 9M 2024 compared with an impairment charge of N165m reported in 9M 2023. The company’s Foreign Exchange Loss of N163.24bn in 9M 2024 from a N4.69bn Loss in 9M 2023 weighed heavily on the EBITDA bringing it to a loss of N134.10bn in 9M 2024 from a gain of N6.45bn in 9M 2023. This allowed for a negative EBITDA margin of -121.2% (-128.6ppts) in 9M 2024 compared with a positive 7.4% in the prior year.

However, an increase in the company’s Depreciation and Amortization to N1.50bn in 9M 2024 from N1.45bn in 9M 2023 brought the company’s Operating Loss to N135.60bn in 9M 2024 from a gain of N4.00bn in 9M 2023. The company’s Other Income plunged to N231m in 9M 2024 (N6.26bn in 9M 2023) coming from only rental income.

The company’s Interest Income was up 62.2% to N5.32bn in 9M 2024 from N3.28bn in 9M 2023 while its Interest Expense rose to N2.26bn in 9M 2024 from N149m in 9M 2023 bringing its Net Finance Income to N3.06bn in 9M 2024 from N3.13bn in 9M 2023. Despite its net finance gain, the company’s previous Foreign Exchange Loss and significantly reduced low Other Income resulted in a Loss Before Tax of N132.30bn in 9M 2024 compared with a profit of N14.30bn in 9M 2023 while its Loss After Tax came in at N94.78bn in 9M 2024 compared with a Net Profit of N7.67bn in 9M 2023 after the application of a Tax Expense of N37.52bn.

We have a price target of N24.70/s with a Sell recommendation. Current Price; N38.00/s.

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