UK bathing woes create stink for profits at PZ Cussons

Shares (Berlin: DI6.BE - news) in PZ Cussons (LSE: PZC.L - news) lost more than a quarter of their value early on Thursday morning after the company issued a profit warning.

The consumer goods firm, which includes the Imperial Leather soap and Original Source shower gel brands in its stable, said it had failed to see a pick-up in sales in two key areas of operations since its last trading update.

It said these were its Nigeria milk and UK soap businesses, adding that it had not been immune from the Brexit-linked challenges facing the retail sector .

The statement read: "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.

"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."

Profitability has been squeezed by stiff competition among supermarkets in particular, which have been under pressure to keep prices down in their dealings with suppliers.

PZ Cussons said it was now expecting annual profit before tax for the year to 31 May to come in between £80m and £85m.

That compared to previous market forecasts of around £100m.

The company - a rival of Unilever (NYSE: UL - news) which confirmed it was leaving its UK HQ on Thursday - said it would be taking a number of actions to help mitigate the pressures including a reassessment of the group's operating model to further reduce costs.

While it is understood that the prospect of some job losses among its 5,500 global workforce has not been ruled out, it does not employ many staff in the UK as its business model largely relies on sub-contracting.

Shares - down 26% in early trading - later recovered some of that ground to close 16% down.