LONDON (ShareCast) - (ShareCast News) - Consumer goods firm PZ Cussons, which produces Imperial Leather soap, reported a 38% drop in pre-tax profit for the first half of the year, due to challenging conditions in Nigeria in Australia, while it maintained that it is on track to meet full year expectations.
For the six months ended 30 November 2016, revenue before exceptional items slipped 2% to £378.2m, or 2.6% on constant currency, compared to the previous year.

This resulted in a 4.5% fall in pre-tax profit before exceptional items, or 55% on constant currency, to £40.2m. But pre-tax profit, after exceptional items, dropped 37.8% to £24.9m.

Profits in sterling were only "slightly lower" with a pre-tax profit and exceptional item of £40.2m, despite a challenging macro environments particularly in Nigeria, the company's largest market.

In Nigeria, liquidity remained poor with the exchange rate weakening on both interbank and secondary markets, due to low oil prices, the country's main export, which reduced Nigeria's income. The company said it remains "well placed" to deal with these challenges with strong local brands and local manufacturing for products and an extensive distribution network. It said that as Nigerian consumers are under significant inflationary pressure, the company is able to tailor product sizes to meet demand.

Revenue from Nigeria in the period fell 14% to £135.7m, or just 0.4% on constant currency.

Overall profitability in Ghana and Kenya was ahead of the prior year.

Elsewhere, in Australia there were "tough" trading conditions with higher levels of promotions required to maintain volumes, and there were lower levels of profitability in the first half. New product launches and margin improvement initiatives are planned in order to improve profitability.

In the UK, there was a "robust" performance in the washing and bathing division with new product launches, while following a poor summer, performance in the beauty division rebounded.

Operating profit fell 7.5% to £41.8m, or 8.4%, and operating profit before exceptional items declined 38.5% to £26.5m.

Basic earnings per share decreased 32% to 4.59p.

Net debt remained largely flat at £191.3m, which was 1.5 times earnings before, tax, depreciation and amortisation (EBITDA).

Chairwoman Caroline Silver said the company remains on track to deliver on full year expectations, and so raised the interim dividend by 2.3% to 2.67p.

She said: "The strength and breadth of the group's product portfolio has allowed us to hold or grow the share of our brands in our main markets and product categories. We intend to reinforce this in the second half of the financial year with a number of major launches and relaunches taking place. Our ability to be agile and nimble is a core strength and a differentiator against our larger competitors."

Shares in PZ Cussons were down 7.9% to 309.90p at 0902 GMT.

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