LONDON -- PZ Cussons (ISE: PZC.L) closed out a tough year at the end of May with profits down over 50%. Like its larger consumer-goods cousins Reckitt Benckiser and Unilever, the company was fighting a two-fronted battle with struggling consumers on one side and rising input costs on the other.
Unfortunately, PZ Cussons also had some unique problems tied to political issues in Nigeria -- the company's largest market -- and the failure to anticipate the level of competitive pressures in Australia.
As of the company's latest trading report, conditions in Nigeria haven't gotten much better and consumers around the world continue to shop for bargains. However, changes made at the end of last year have resulted in the Australian operations returning to profitability and there has been a reprieve from rising raw materials costs.
The newly introduced Cussons Mum & Me line is providing some support in the tough U.K. market, and the company is looking to further product introductions to continue the momentum as the year goes forward.
Additionally, a plan announced last March to shutter factories in order to cut costs is making progress, providing some support to margins even as the company is forced to offer discounts in order to keep customers buying Imperial Leather.
Trimming the fat will make PZ Cussons a better operator going forward, but the going will remain tough until we see an improving consumer environment and a settling of the disruptions in Nigeria. However, the growth potential offered by markets throughout Africa and Southeast Asia -- combined with its relative size -- should set PZ Cussons up for better returns than its larger peers over the next several years.
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The article Is The Worst Behind PZ Cussons? originally appeared on Fool.com.
Nate Weisshaar does not own any shares discussed above. The Motley Fool owns shares of PZ Cussons.The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.
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