Shares in PZ Cussons, the group behind Carex and Imperial Leather soap, fell by more than 20 per cent this morning after it warned over profits.
PZ Cussons said it has begun to overhaul its strategy in a bid to revive the business as UK consumers continue to be cautious amid economic uncertainty and high inflation outstripping wages.
The group, which also makes Original Source shower gel and fake tan St Tropez, expects profits for the full-year to come in lower than expected – between £80million and £85million.
PZ Cussons said it continued to see a slowdown in sales of its soaps in the UK
Shares in the FTSE 250 listed group fell by nearly a quarter at the open, to later trade 15 per cent lower at 235.4p.
‘The UK washing and bathing division has continued to experience lower levels of purchases reflecting consumer caution across all retail channels caused by economic uncertainty and inflation out-stripping wage growth,’ it said in a statement.
‘Whilst new product launches have been well received, they have not had the desired uplift in sales to compensate for the wider volume and margin shortfall,’ it added.
PZ Cussons said it is looking to reduce costs and focus on ‘fewer, bigger projects requiring lower levels of complexity’. It also is reviewing its milk business in Nigeria to bring it back to profit.
It comes as the group said its operations in Nigeria suffered, but trading remained ‘robust’ in its other markets in Australia, Indonesia and its beauty division.
‘At the time of our interim results announcement in January, we reported that performance in the first half of the year had been constrained by trading conditions in the UK and Nigeria, and that delivery of the full year result would be dependent on trading conditions in those markets for the balance of year,’ the group said.
At its interim results in January, PZ Cussons saw adjusted pre-tax profits slide 15 per cent to £34million in the six months ending in November, driven largely by tough UK trading conditions as shoppers tightened their belts.
In December, the group admitted that its first-half profits would come in 10 per cent lower than the same period last year, with ‘tough trading conditions expected to continue for the full year… the consumer under pressure in all markets’.
Mike van Dulken, head of research at Accendo Markets, said that since then ‘things have clearly failed to improve, perhaps worsened’, despite new product launches and a seasonal rump-up in Nigeria.
‘Consumer confidence remains an issue in the UK, due to economic uncertainty and high inflation/low wage growth conundrum. Inflation is also dampening demand and prices in Nigeria. A cost cutting review has also been announced, focusing on less packaging and fewer, simpler but bigger projects. But will this be enough?,’ he added.