PZ Cussons in share drop as costs surge

PZ CUSSONS yesterday saw its shares plummet by more than nine per cent as it warned that the year ahead would be tough due to rising costs.

The maker of Imperial Leather reported a 3.4 per cent rise in first half pre-tax profit which disappointed some analysts.

However, a poor performance in Europe has been partially offset by relatively healthy Asian markets, in the six months to 30 November. In the UK the company was hit by tough comparative figures after its Carex anti-bacterial gel sales were boosted by a swine flu outbreak.

“Against such a backdrop, we do harbour concerns that our 2010/11 EBIT (earnings before interest and tax) forecast of £115.7m – which requires 23 per cent growth through the (second) half, may prove too much of a challenge to deliver,” said Shore Capital analyst Darren Shirley.

Shore cut its full-year pretax profit forecast to £111m from £116.3m and said it was considering reviewing its ‘buy’ rating on the company’s shares.

PZ Cussons chairman Richard Harvey said that tough trading conditions and rising raw material prices – particularly of palm oil which it uses in many of its products – meant the company remained cautious going forward.

The FTSE 250 listed company, which also owns Original Source, Charles Worthington and The Sanctuary spa range, saw a five per cent fall in European operating profits to £23.7m. But Asian operating profits jumped to £8.6m from £6.1m in the same period the year before.

And total group sales were up 1.3 per cent to £374.8m, delivering pre-tax profits that were flat at £44.5m.