PZ Cussons to convert N51.79bn loan from UK investor to equity

PZ Cussons Nigeria Plc says it will convert a N51.79 billion ($34,26 million) intercompany loan from its UK-based parent company, PZ Cussons Holdings (PZCH), into equity as part of a financial restructuring.

In a document published on the Nigerian Exchange Limited (NGX) on Saturday, but dated February 13, 2025, the company said 2.19 billion new ordinary shares at N23.60 per share will be issued to PZCH.

The move was approved at a special board meeting on February 13.

According to the manufacturer of personal healthcare products, the conversion will increase PZ Cussons Nigeria’s share capital from N1.99 billion to N3.08 billion.

PZ Cussons said the decision is aimed at reducing the debt burden of the company and strengthening its financial position amid economic challenges in Nigeria.

However, the move is subject to shareholder approval at an extraordinary general meeting (EGM) scheduled for March 13, 2025.

PZ Cussons said the conversion will further create value for shareholders and other stakeholders for several reasons.

“Strengthening the balance sheet allows future operating cash flows to be allocated more strategically towards value-creating opportunities that align with the Company’s growth objectives,” the company said.

“It will materially reduce the Company’s exposure to foreign exchange risk and its potential impact on Company earnings, thus reducing future foreign exchange losses and further deterioration of the Company’s net asset position.

“It will improve the Company’s financial ratios, such as debt-to-equity and coverage ratios, potentially enhancing the Company’s financial standing and creditworthiness.”

Also, PZ Cussons said the conversion will help restore it to a positive net asset position.

WHY PZ CUSSONS IS CONVERTING DEBT TO EQUITY

PZ Cussons said PZCH provided a $40.26 million intercompany loan to its Nigerian subsidiary in June 2022 to settle outstanding foreign currency payables.

The loan was intended to cover costs related to raw material imports, operations, and other expenses.

The company said the funding became necessary due to limited foreign exchange availability, which made it difficult to meet its obligations.

However, the liberalisation of Nigeria’s foreign exchange market in June 2023, followed by the continued depreciation of the naira, significantly impacted the company’s financial position.

“The Naira value of its foreign currency-denominated loans has increased significantly, resulting in an unrealised exchange loss of N157.9 billion, a loss after tax of N76.0 billion, and a negative shareholders’ equity position of N27.5 billion for the financial year ended May 31, 2024,” the company said.

Despite strong operational growth — reporting a 34 percent revenue increase for the full financial year ending May 2024 and 42 percent for the half-year period ending November 2024 — further naira depreciation has continued to erode profits.

“The adverse revaluation impact on the foreign currency loans has resulted in losses after tax and a worsened negative net equity position of N34.5 billion as of November 30, 2024,” PZ Cussons said.

“The Board and PZCH, after extensive discussions, agree that the conversion of a portion of the outstanding loan amounting to $34.26 million into equity is the most efficient option to strengthen the company’s balance sheet and significantly reduce exposure to further foreign exchange losses.”

The company said following the conversion, the remaining shareholder loan balance of $6 million will remain payable.