PZ Cussons issued a trading update following a tough trading environment in Nigeria, mainly driven by rising inflation and diminishing disposable income. This has caused a downturn in sales and margins. The company stressed the milk category as the one most hit by the economic problems.

Following the announcement of its interim results last January , PZ Cussons a trading update that reviews downwards its full year results. The company’s management had cautioned, in the beginning of the calendar year, that the company’s performance would be highly dependent on the evolution of trading conditions in the UK and Nigeria. It is now been made clear to shareholders that results will not meet expectations, with profit before taxes likely to be between £80-£85 million ($111.7 million).

Coast Evaporated Milk is one of the products sold by PZ Cussons Nigeria. The company has said the milk category is the one under most intense stress.

Poor performance by PZ Cussons Nigeria mainly relates to the rising cost of inflation in recent years putting a lot of pressure on the population’s disposable income and leading to significantly lower sales. Companies have lowered prices in an effort to resolve high stock levels. According to PZ Cussons, in Nigeria, this is most obvious in the milk category which has seen intense competition between the different players resulting in lower sales and profit margins.

Management has assured shareholders that it is taking action to face the business pressure. Among the masures being taken by PZ Cussons Nigeria are an overall “reassessment of the operating model” in order to reduce overhead costs, the review of product costs with focus on areas that could be more efficient such as packaging, and the review of the Group’s milk business as a whole.

PZ Cussons has not been the only company hit by the tough economic environment in Nigeria where, in the past years, the country has faced a recession and rising inflation, accompanied by the government’s ill-advised monetary policies, according to some analysts. However, Nigeria managed to exit the recession with both retailers and manufacturers back to reporting positive results. Just last week, Nestlé reported net profit up by 326%.

PZ Cussons announced it would release a further trading update in June 2018, after the closure of the financial year.