PZ Cussons, the maker of Imperial Leather soap, said profit before tax fell to £48.5m in the 12 months to 31 May 2012, down from £108.1m the year before.
Following a profit warning issued in March, the UK-based soap and shampoo maker put the fall down to higher raw material costs, estimated to be a £25m year-on-year rise, and worsening conditions in Nigeria and Australia (two of its key markets).
This scored heavily against the 4.7% rise in revenue, which rose to £858.9m from £820.7m, with margins being squeezed across the board.
The 55.1% drop in profits before tax included £43.8m in exceptional costs. The £25.5m acquisition of hair styling company Fudge from Australian-based Sabre Group, which joined St Tropez and Charles Worthington in the company’s newly created Beauty arm.
PZ Cussons reported a strong performance in its Beauty division, with a number of new product launches across the portfolio of Sanctuary, St Tropez, Charles Worthington and Fudge.
The majority of the £43.8m labelled as exceptional costs are related to PZ Cussons’ supply chain optimisation project, which began in March following consecutive years of rising raw material costs.
Together with ongoing wage inflation in emerging markets, PZ Cussons has been developing programmes to reduce the costs involved in the manufacturing process. The project will be complete by 31 May 2013.
PZ Cussons is closing its manufacturing facilities in Australia with supply being moved to other group facilities and third parties, and is reviewing its manufacturing facilities in Poland.
It is also closing its manufacturing sites in Ghana, with a proportion of the supply being moved to its existing Nigerian facilities.
PZ Cussons has said that the project will cost approximately £19.9m for redundancy and other associated items, with payback expected within three years. There will be a further non-cash charge of approximately £19m for asset write downs, with £27.5m charged in exceptional costs in the year to 31 May 2012 and the balance falling in the next financial year.
The company launched Cussons Mum & Me in the UK at the start of this year, a new brand of personal care with products specifically designed for mothers and babies.
Richard Harvey, chairman of PZ Cussons, said that trading was largely in line with expectations. “Profits were lower with a robust performance in the UK, strong trading in the Beauty division and positive momentum in Indonesia, more than offset by specific market challenges in Nigeria and Australia, and the impact of the largest year-on-year increase in raw material costs we have experienced.”
“As we start the current financial year this momentum [in the UK and Beauty division], together with our new Cussons Mum & Me and Fudge ranges, will help to ensure this growth continues. While the situation in the Group’s important Nigerian market remains fragile, we are confident that PZ Cussons will return to profitable growth in the current financial year.”