You getso usedto company managementover-selling their financial statementsthat the desultory opening linein todays trading update from PZ Cussons (LSE: PZC) comesas a shock. The board announces that the overall performance of the Group has been in line with expectations with profits broadly flat versus the comparative period.Ho hum.
Get the balance right
That isnt much to get excited about, and the share price wasdown 1.85% in early trading, although has since picked up again. There is little reason to rush and sell, however, with management presenting a more solid second line: The Groups balance sheet remains strong with cash generation for the period also in line with expectations.
The good and bad in todays statement may both be in line with expectations.The problem is that those expectations are now somewhatlow. The companys share price is down around6% over the last five years, in a period when the FTSE 100 as a whole rosemore than 23%. PZ Cussonshas slumped 10% in the last three months, as its key European markets and Nigeria in Africa battle againsttough trading conditions.
European performance has been mixed, helped by new UK product launches in its washing and bathing division,under its Imperial Leather, Carex and Original Source brands, but hindered by setbacks inits beauty division, with the poor summer knocking sales of St Tropez in the UK. However, performance over the rest of its brand portfolio has been good, it said.Performance in the smaller markets of Poland and Greece was you guessed it in line with expectations.
PZ Cussonsis also struggling further afield, hit by local issues tough trading conditions in Australia and currency devaluation in Nigeria. The smaller markets of Thailand, the Middle East, Ghana and Kenya were, ahem, in line with expectations.
In the pipeline
PZ Cussons finally makes a belated effort to big up its latest results towards the end of the statement: The strength of the Groups brand portfolio and innovation pipeline continues to ensure that the market shares of our products remain strong in all markets despite tough trading conditions.
The companyis pinning its hopes on brand renovation and innovation to underpin second-half trading results, and is looking to mitigate higher costs across its UK businesses. It boastsa solid range of soap, detergent, personal care,beauty and nutritionbrands, including Imperial Leather, Original Source, Sanctuary Spa, St Tropez and Morning Fresh, but has never captured investors heartsto the same degree asrivals Reckitt Benckiser Groupand Unilever.
Trading conditions are certainly tough globally, but investors will be looking for more signs of growth potential. PZ Cussons isnt even that cheap, trading at just over 18 times earnings and yielding an underwhelming 2.6%, although safely covered 2.1 times.Its strong balance sheet givesinvestors little to worry about, but little to get excited over either.Far from sickly, but alsoa long wayfrom bursting with health and vitality.
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Harvey Jones has no position in any shares mentioned. The Motley Fool UK owns shares of and has recommended Unilever. The Motley Fool UK owns shares of PZ Cussons. The Motley Fool UK has recommended Reckitt Benckiser. We Fools don’t all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.