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PZ Cussons: Any smiles this year?

WILL the shareholders of PZ Cussons Plc be able to smile more broadly when financial year 2012 ends by May this year? Will the figures of the year be better than the 2011 ones or worse? Will the recent one week plus nationwide strike end up boring a hole in the company's fortunes?

One thing is obvious not only to PZ Cussons. That one week plus was a time there was no production, no sales; no inflow of cash from past sales yet workers are still going to be paid their full take home for the month, taxes due to government either from payee or in relation to excise and custom duties will also have to be paid. All of that will affect profitability one way or the other but how far will now become a personal thing to each company, in line with recent corporate focus since the strike.

In the case of PZ Cussons, half year figures released last week to the stock market do not give much room for a better year end after the one week plus power show. By November 2011, that is six months into 2012 financial year, cost of sales was running very much ahead of turnover growth.

According to the figures, PZ Cussons recorded 20.9 per cent growth in turnover within the first half from a 48.5 per cent rise in cost of sales.  The period end turnover was N32348m compared to N26766m by November 30, 2010. The cost of producing or assembling the items thus sold came to N26568m as against N17890m previously.

This singular development was hard for the company to handle or cage because even though selling, distribution and administrative expenses dropped by28.9 per cent to N4551m from N6402m, the decrease profit before tax came to 49.7 per cent to N1297m from N2580m, according to the brief. Mind boggling may be but the reality was that by November, PZ Cussons was battling with a far lower 4.01 per cent profit margin compared to 9.64 per cent by the first half of 2011 financial year.

With stock up by 64.6 per cent to N28777m from N17481m, yuletide sales certainly must have taken place smoothly without any hitches and hopefully should have led to better figures for the third quarter to February. However, with the one week plus strike, there is no doubt at all that some of the gains made in that period that ought to help cushion the trying first half effects, must have been lost to the strike.

More so, when by the same half year, the brief indicates very drastic drop in PZ Cussons cash position by 96.9 per cent to N116.9m from N3811m previously. No doubt the stock level had a hand in this hence in fact the working capital position showed 6.41 per cent rise. Meanwhile, credit sales to customers swallowed up some good cash too with trade and other debtors rising by 32.7 per cent and 31.7 per cent respectively.

This was in spite of 7.27 per cent drop in trade creditors' balance and acquisition of N269.8m short term borrowings.

So, it most probably will take a miracle for PZ Cussons to equal its declared dividend level of 2011 financial year but then, they say miracles still do happen.

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