PZ Cussons Record £88.2 Million Foreign Exchange Loss Due to Naira Devaluation

PZ Cussons Plc, a multinational company, has announced that the firm recorded a £88.2 million foreign exchange loss due to the devaluation of the naira.

Jonathan Myers the CEO of PZ Cussons Plc announced this on Wednesday in a statement where he said the impact of the Nigerian unit devaluation on its bottom line was significant.

PZ Cussons Plc Chief Executive Officer Jonathan Myers, in a statement on Wednesday, said that the impact of the Nigerian unit devaluation on its bottom line was significant.

He said, 

• The most significant challenge we have faced has been the devaluation of the Nigerian naira, which is around 70% weaker today than a year ago, representing the most significant drop in the currency’s history.

• As we set out in September 2023, macroeconomic developments in Nigeria would be the critical determinant of the FY24 results. While we continue to make good progress in managing this volatility, the further devaluation in recent weeks will inevitably impact our FY24 results.

• PZ Cussons is a company that produces brands like Carex and Imperial Leather. The company warned shareholders about its profit and cut its interim dividend by nearly half due to a significant slide in the Nigerian naira in the first half.

Myers reported that the company was taking the “prudent step” to cut its dividend in light of the results, with the half-year payout falling to just 1.5 pence per share, down from 2.67 pence.

He added,

• The devaluation of the Nigerian naira has had a significant impact on our financial results and comparisons to the prior year. The foreign exchange loss in the period was £88.2 million and was wholly the result of the devaluation of the naira, which fell by 51% between May 31, 2023, and December 2, 2023.

• Statutory results show an operating loss of £89.7 million that these foreign exchange losses have materially impacted. Revenue declined by 17.8% (£59.8m) to £277.1m, of which £52.9m was attributable to the naira devaluation.

• Given the financial impact of the naira devaluation, the board has determined it prudent to reduce the interim dividend by 44% to 1.50p.

It was also reported that the firm adjusted its forecast full-year operating profit at reported rates of exchange to be in the range of £55–60 million for the 12 months to May 31, 2024, which is lower than £73.3 million in the previous year.

It said, 

• At our FY23 full-year results in September, we noted that the Nigerian macroeconomic environment and the currency, mainly, would be the critical determinants of FY24 results.

• Since then, we have experienced further naira depreciation, with the official rate falling more than 30% since our balance sheet date of December 2. As a result, we now expect FY24 adjusted operating profit, at reported exchange rates, to be in the range of £55–60 million.

The fall of the naira primarily affected PZ Cussons Plc because its Nigeria branch represents 35% of the company’s revenue and 22% of its assets for Fiscal Year 2023.

Since the unification of the foreign exchange market in June last year, companies across different industries have reported FX losses on their balance sheets, and many are threatening to relocate from the country.

Back Story

Last year, in December, PZ Cussons Nigeria Plc shareholders announced the cancellation of their resolutions agreed upon during the 74th Annual General Meeting, where they all decided on a cut in the company’s share capital.

The decision by the shareholders was passed at the 75th Annual General Meeting (AGM) held in Abuja, according to a statement filed with the Nigerian Exchange Limited.

The cancellation of the resolutions came months after PZ Cussons Nigeria published that its majority shareholder, PZ Cussons Holdings Limited, offered to acquire shares held by other shareholders.

The company initially proposed to pay minority shareholders the sum of N21 per unit. However, an upward review was announced in November, and minority shareholders are expected to be paid N23 per unit of share.

However, the CBN is working on ways to tackle the challenges.