PZ Cussons Nigeria is principally engaged in the manufacture, distribution and sale of a wide range of consumer products and home appliances, which are leading brand names across the country in detergent, soap, Pharmaceuticals, cosmetics, confectionery, refrigerators, freezers and air conditioners. The company also distributes the products of Nutritional Limited, Hare field Industrial Nigeria Limited and PZ Wilmar Limited. In Q2, 2011, he company recorded strong revenue growth in all its business units of Persona Care, Home care, electrical and Nutrition.
In order to combat the threat facing manufacturing companies in Nigeria, PZ Cussons has invested in improving its manufacturing and distribution facilities under the “Project Unity” program it concluded in 2010, with the upgrade of the white goods (white goods are major household appliances) manufacturing and distribution facilities in llupeju, Lagos State. Also, the new Detergent Tower in Ikorodu, Lagos State, which was completed at the end of 2009, is now fully.
Three years later it opened office in Nigeria, which was to become very important for trade. In 1920 Paterson Zochonis began to trade in Cameroon . The company’s success was based on its intimate knowledge of the west African market, its network of trading contacts and the high reputation of its goods. Although Paterson Zochonis did not manufacture any of its export good, these goods were branded with its own trademarks. One of its major export commodities was wax printed cotton fabrics. The role that Paterson Zochonis played was that of a merchant converter. This means that Paterson Zochonis took responsibly for acquiring supplies of greyclth, the term for unbleached cotton fabric, and commissioning cotton printing companies to produce finished fabrics using designs produced by its own designers. The fabrics were stored and packed for export in its own warehouse.
THREATS
PZ cussons is a manufacturing company, and thus is susceptible to the challenges facing the manufacturing businesses in Nigeria. These includes: epileptic power supply, the country’s deficient infrastructure, credit squeesze, low purchasing power; high financing cost in the financial market, among others
VALUATION
Using discounter free cash flow method (DCF) we arrived at a fair value of N24.90 per share, which is our fair value. The forward earnings yield and dividend yield based, on our fair value generate 2.98% and 1.49% respectively., we therefore placed a HOLD on PZ Cussons stock at the current market price of N26.90.
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