PZ Cussons has announced plans to sell its African subsidiaries, including its Nigerian businesses, due to persistent foreign exchange (forex) challenges. The company made this disclosure in its preliminary financial results for the fiscal year ending May 31, 2024, published on its website.
According to the report, the parent company of PZ Cussons Nigeria is exploring both partial and full sales to reduce its exposure to the sharp fluctuations in the Nigerian naira, which has depreciated by 70% during the period.
The statement read, "Over the past year, we have made significant operational progress and delivered on our strategic priorities despite ongoing macroeconomic challenges. At the same time, we have taken important steps to transform our business and maximize shareholder value by focusing our portfolio on areas where we are most competitive."
The company highlighted that the substantial devaluation of the Nigerian naira has had a major impact on its financial performance. "The 70% devaluation of the naira has significantly affected our reported financials. We have worked hard to mitigate this impact while continuing to serve Nigerian consumers who are grappling with inflation and economic difficulties."
Regarding the potential sale, PZ Cussons noted it had received multiple expressions of interest in its African business. "We have received several inquiries regarding our African operations, recognizing the potential of our brands. This could result in a partial or full sale."
The company also mentioned ongoing efforts to divest other assets, such as its St. Tropez business, and expressed confidence in the long-term potential of PZ Cussons. "Despite the challenges, we are confident that PZ Cussons, with a stronger portfolio of competitive brands, will continue to achieve sustainable, profitable growth."
Commenting on the forex losses, the company disclosed that it recorded a foreign exchange loss of £107.5 million, primarily from the translation and settlement of U.S. dollar-denominated liabilities in its Nigerian subsidiaries, caused by the sharp depreciation of the naira.
Despite the challenges in Nigeria, PZ Cussons highlighted strong performance in its UK personal care business, with double-digit revenue growth.
In September 2023, the company expressed interest in acquiring the remaining 26.73% minority shares in its Nigerian subsidiary at ₦21 per share. As of May 31, 2024, PZ Cussons held a 73.27% stake in the Nigerian subsidiary, equivalent to 2.90 billion shares valued at ₦45.53 billion as of September 18.
However, the Nigerian subsidiary has struggled financially, posting a ₦94.78 billion loss in the third quarter of the 2023/24 fiscal year, compared to a ₦11.213 billion gain in the same period the previous year. In the second quarter, the company recorded a ₦74.14 billion loss, and it remains in a negative net asset position, with liabilities exceeding assets by ₦46.42 billion due to naira depreciation.
