PZ Cussons is reviewing its Nutricima milk business in Nigeria amid ”intense competition”.
In January, the UK-based FMCG firm said its six-month earnings through 30 November had been ”constrained by trading conditions in the UK and Nigeria” and that its full-year results would be dependent on conditions in those markets.
PZ Cussons announced the review in a trading update issued yesterday (15 March) in which it underlined the challenging business environment in Nigeria.
”Following the significant cost inflation of recent years, the Nigerian consumer’s discretionary income remains under pressure with subdued buying levels.
”As a result, the usual peak season uplift has not occurred to the expected level. Consequently, inventory levels in the trade remain high leading to intense competition, most noticeably in the milk category, which in return is resulting in lower volumes, prices and margins.”
PZ Cussons said it had started a review of its milk business in Nigeria “with an objective of returning it to profitability”.
A spokesperson representing PZ Cussons claimed to just-food today that Nutricima’s main rival in Nigeria had been selling product below cost, and added that options for the division could include, according to analysts, the sale of the business, a joint venture with another party or a ”root-and-branch restructuring”.
Nutricima was set up in 2003 as a joint venture with Glanbia, which withdrew in 2015 because the business no longer fitted the Irish group’s priorities”. The business sells evaporated milk, milk powder and UHT milk under brands including Nunu, Olympic and Yo.
PZ Cussons’ Africa division, which includes the Nutricima operations, posted a 6.6% increase in first-half revenues to GBP144.7m (US$202m). Operating profit plunged more than 64% to just GBP4.1m.
In yesterday’s trading update PZ Cussons said annual profits for the group as a whole will fall short of expectations in the year to 31 May.
Africa is a key source of income, with the segment accounting for 37% of PZ Cussons’ group revenue of GBP385m in the first half of the year.
The company added it now anticipates annual profits before tax will be in the range of GBP80-85m. That metric dropped 15% to GBP34m in the first six months of its financial year.
A statement from PZ Cussons regarding its Nutricima review will be issued in June, according to the spokesperson.