The group said that macro-conditions in Nigeria were to blame for its poor performance. “A sustained lack of liquidity at both consumer and trade level has resulted in a significant contraction in the size of the market, resulting in lower volumes, prices and margins,” it said.
It added that long delays at the port in Lagos, along with increased port fees ate into profits.
The firm said that its Africa revenue declined by 9.8% to £275.6m from £305.6m in 2017, while Operating Profit fell 77.7% to £6.3m. The group declared a “disappointing” adjusted operating loss of £1m for the year in Africa.
It noted that its Nutricima milk business in Nigeria was hardest hit by these conditions, resulting in an operating loss for the year. Profits were also lower across the rest of the portfolio.
“In Nutricima, aggressive competitor discounting throughout most of the financial year resulted in significantly lower revenue and the business moving from an operating profit to an operating loss. A full reassessment of the business model has taken place with greater focus now being placed on consumer pack innovation,” the company said.
The group said a major overhaul was required to get PZ Cussons back on track after writing off £24.8 million against its Nigerian Nutricima milk business and Australian brand five:am, which makes yoghurt and granola.
“We cannot rely upon short term economic conditions improving markedly in our key markets and are therefore taking action to reposition the group to return to profitable growth,” Non-executive chair Caroline Silver said, announcing a new “focus, scale and accelerate” strategy.
PZ Cussons said it will now focus on personal care and beauty brands because they represent “our strongest brands across the geographies that offer us the best opportunities for revenue and margin growth”.
“Our resources and investment will be prioritised behind key categories and brands in only those geographies offering the clearest opportunities in order to return the group to sustainable, profitable growth.”
There will also be a slimming-down of its Nigerian business, where the economy has suffered and disposable income has reduced, to cope with “current economic realities whilst still being ready to take advantage of future recovery”.
Investment will be focused on core personal care and beauty brands in geographies that can scale growth, with simplification of Nigerian activities ready for the market recovery, plus disposal of non-core brands and activities.
The cost base will be “tightly managed” and results “will not be immediate, but we expect 2019/20 to be an important transitional year”.