Numis reiterates 'reduce' rating for PZ Cussons after trading update

Shares in PZ Cussons were in the red on Thursday as Numis reiterated its ‘reduce’ rating after the company warned of difficult conditions in its main market of Nigeria.

In an update for 27 January to 13 April, Cussons said overall trading has been in line with expectations and the company is on track for the full year but cautioned on trading in Nigeria.

The Imperial Leather soap maker said the performance in Europe and Asia offset more difficult trading conditions in Africa. More specifically, in Nigeria, whilst the official naira exchange rate continues to be stable, a lack of availability at that rate is resulting in the majority of dollars being purchased at a premium of 50-70%.

The resultant cost impact is being managed through changes to relative pricing in an environment where trading conditions remain challenging and consumer disposable income is under pressure, the company said.

“Trading in Nigeria has been slightly worse than was expected in January and the repercussions of a lack of liquidity here will run on too into next full year,” according to Numis.

“We made very cautious estimates at the first half stage but have lowered pre-tax profit projections slightly more.”

Numis cut this full year’s pre-tax profit estimate from £101m to £100m and have lowered the following full year results by £1m. The broker left the target price unchanged at 262p.

Shares fell 1.76% to 312.40p at 1325 BST.