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.