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13.10.2008 Feature Article

NTHC Research Feature

Cedi Depreciation Affects PZ PZ Cussons Ghana Limited recorded a significant fall in its financial performance during its first quarter ended 31st August 2008. The company's net profit fell by about 57% from 553,672 recorded during the same time last year. This fall is attributed to the high cost of raw materials as a result of the significant depreciation of the cedi against the dollar.

The company made 23% increase in its sales revenue from GH ¢7,976,007 to GH ¢9,824,561. Despite the significant increase in sales turnover, the bottom line indicators fell short as a result of more significant increases in the company's cost of sales and other administrative expenses.

The company's Gross profit fell from GH ¢ 751,006 to GH ¢315,469. This indicates 58% fall on year on year basis.

These resulted in Net Earnings also falling by 57% from GH ¢553,672 to GH ¢236,603. Earnings per share (EPS) therefore fell significantly from GH ¢1.98 in August 2007 to GH ¢0.85 during the same period in 2008.

Management of the company attributes its less impressive performance to various exogenous variables prominent amongst which is the fall in the value of the Ghana Cedi against the US Dollar. So far this year the cedi depreciated by about 17% (from GH ¢0.9672 to GH ¢1.1336 per Dollar).

This makes the company's imported raw materials and packaging materials expensive resulting in the less inspiring financial performance.

Other reasons for the non improved performance are a significant increase in the world market prices of Crude Palm Oil which constitutes a chunk of the company's inputs, coupled with a high cost of fuel and energy.

The company's listed equity recorded 35% price appreciation so far this year from GH¢ 0.8312 as at the beginning of the year to GH ¢1.12 as at the close of the week. It is trading at a Price Earnings ratio of 9 multiples.

_anonymous Columnist
_anonymous Columnist, © 2008

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