PZ Cussons blames Nigeria for second profit warning

Soap and shampoo maker PZ Cussons has issued a second profit warning in less than four months, blaming a hit to sales from social unrest in Nigeria, its biggest single market.

Shares in the maker of Imperial Leather soaps and Carex anti-bacterial hand washes were down 10.2 percent at 1001 GMT on Tuesday after it said profits in Nigeria over the last two months had been affected by a continuation of economic and social tensions

Nigeria, Africa's most populous country, accounts for 30-40 percent of PZ Cussons' total revenue.

"Given the importance of Nigeria to the group, the impact of the continuing tensions in the country will be significant, resulting in the group's overall (year to May 31 2012) performance being some way below expectations," the firm said.

PZ Cussons highlighted the continuation of social instability in northern Nigeria which has directly impacted sales, and the removal of a fuel duty subsidy in January that has hit consumers' disposable income and led to higher transport costs and port disruption, affecting both sales and costs.

Despite its current problems in Nigeria the firm expects the removal of the fuel duty subsidy to be beneficial for the medium term macroeconomic health of the country.

PZ Cussons, which also owns beauty brands Charles Worthington, Sanctuary and St Tropez, first warned of problems in Nigeria in January.

Shares in the firm were down 34 pence at 300 pence at 1001 GMT, valuing the business at about 1.26 billion pounds ($2 billion).

"This is undoubtedly a disappointing statement, and while we feel this may ultimately prove to be the bottom of the news flow cycle, we acknowledge that the outlook in Nigeria remains uncertain," said Panmure Gordon analyst Graham Jones, who cut his 2011-12 pre-tax profit forecast by 13 percent to 89.1 million pounds.

PZ Cussons said trading in the January 25 to March 26 period in all its other markets in Europe and Asia had been in line with management expectations and was expected to be so for the balance of the year.

"Looking ahead to the new financial year commencing June 1, the group is expected to return to profitable growth in all markets including Nigeria," it said.

It said this growth would be supported by the benefits of a major programme to cut costs in its supply chain, also announced on Tuesday.

That will see the firm close manufacturing plants in Australia and Ghana and restructure facilities in Poland.

The programme will have a cash cost of 19 million pounds, mainly for redundancies, with a further non-cash charge of 20 million pounds for asset write downs. Payback is expected within three years.