Manufacturers of big-name household goods are usually considered to be reliable safe havens in times like these. It’s not a reputation that PZ Cussons (LSE: PZC) currently enjoys though. Its share price has dropped 22% during the panic selling of the past three weeks.
PZ Cussons hasn’t been the flavour of the month for some time, truth be told. Tough trading conditions across Europe and in Nigeria has long weighed it down. And in the six months to November, revenues (at constant currencies) dropped a further 4.3% year-on-year.
There was some crumb of comfort in January’s most recent update however. The FTSE 250 company said it expected a stronger performance in the second half on the condition that there is “no further worsening of the economic and trading environments across our key geographies.”
Soap sales explode
The blowing up of the coronavirus crisis has caused many to doubt PZ Cussons’ ability to bounce back in the latter half of the fiscal year. And this is why the share price has rattled lower along with the broader market.
But the business has a significant trump card to fall back on. Through its beloved brands like Imperial Leather, Carex, Original Source and Premier Cool, PZ Cussons is one of the planet’s biggest players when it comes to the business of making soaps, shower gels, bath products and antibacterial gels.
I probably don’t need to tell you demand for these personal care goods is exploding across the globe, a reaction to the relentless spread of the coronavirus. If your local supermarkets are anything like mine, you’ll be greeted with rows upon rows of empty shelves where these commodities are usually kept.
A wise buy
It’s more than likely PZ Cussons’ products will keep ripping through the roof too. Infection rates are accelerating in many parts of the globe, a crisis which the World Health Organisation yesterday called a “pandemic”. The UK government earlier said it expected infections to peak in a few months and remain around these levels for another three, illustrating expectations of a prolonged battle against the virus.
PZ Cussons has an extra trick up its sleeve too… brand power. It is one of the biggest tools in the arsenal of fast-moving consumer goods (FMCG) companies like this. And, in times of crisis, consumers especially flock to established and trusted labels before any other. We’ve all grown up using Imperial Leather soap, for example, a brand that’s been in British shops since the 1930s.
What’s more, the firm’s doubling down on marketing spend and product development to reinforce sales of these popular products.
I’d argue that recent share price weakness makes PZ Cussons worthy of serious attention today. It changes hands on a low price-to-earnings (P/E) ratio of 12.7 times for current fiscal year (to May). And it carries a corresponding dividend yield of 5.4% too.
I reckon this FMCG giant could prove to be a valuable lifeboat to buy into during these difficult times.
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Royston Wild has no position in any of the shares mentioned. The Motley Fool UK owns shares of PZ Cussons. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.