PZ Cussons to review operations over macroeconomic challenges in Nigeria

PZ Cussons Plc says it is reviewing its brands and geographies over macroeconomic challenges and complexities in Nigeria.

Apart from Africa, the company also operates in Europe, the Americas and the Asia-Pacific region.

According to the company’s trading update for the third quarter ended March 2024, released on April 24, Jonathan Myers, chief executive officer (CEO) of PZ Cussons, said the company plans to maximise shareholder value by transforming its portfolio.

PZ Cussons uses a non-standard quarterly reporting system, hence the third quarter closing in March.

The company said it is “re-iterating our FY24 outlook, having delivered improved LFL revenue growth in Q3 on an improved volume trend”.

“Nevertheless, the macro-economic challenges and complexities associated with operating in Nigeria are significant and there is much more to do to unlock the full potential of the business,” PZ Cussons said.

“As such, we have undertaken a strategic review of our brands and geographies and have embarked on plans to transform our portfolio, refocusing on where the business can be most competitive.”

Myers said this will allow the company to invest its resources in the key geographies and categories in “which we can win and generate superior returns”.

According to the report, the company now gets over 30 percent of its sales from Africa as of Q3 2024 — after a 48 percent decline compared to same period last year.

“Q3 revenue on a like for like (‘LFL’) basis grew 6.4%. Revenue at reported FX rates declined by 23.7% primarily as a result of the devaluation of the Nigerian Naira, which was on average 60% lower in the quarter compared to the prior year period,” PZ Cussons said.

‘NAVIGATING SIGNIFICANT NAIRA VOLATILITY’

The company said it continued to increase prices in the quarter under review to offset significant foreign exchange-driven cost inflation.

“Despite this, we saw an improving volume trend as a result of ongoing distribution gains and successful marketing activity,” PZ Cussons said.

“The operational focus remains on improving profitability and maximising cash generation whilst remaining competitive and navigating significant volatility in the Naira.”

‘REPATRIATION’

In the past 10 months, PZ Cussons said it has repatriated about £35 million of cash from Nigeria and expects to repatriate a further £15-20 million before the end of May.

“This improvement has been underpinned by fiscal policy changes in Nigeria, providing improved access to US Dollars, and by other operational initiatives enabling our Nigerian business to be self-funding,” the company said.

“Group gross debt has reduced further and is expected to end FY24 in the £160 to £180 million range, down from £251 million as at the end of FY23.”

‘PZ CUSSONS TO REFOCUS PORTFOLIO’

Following a strategic review, the board said PZ Cussons has decided that due to the difficulties in Nigeria, the company is too complicated for its size.

The company said “financial and human resources spread too thinly to generate consistent returns”.

Accordingly, the board said it has decided to refocus the PZ Cussons portfolio on where the business can be most competitive.

In March, PZ Cussons Nigeria Plc said its request to acquire the shares of minority shareholders was declined by the Securities and Exchange Commission (SEC).

If the deal had scaled through, PZ Cussons Nigeria would have been delisted from the NGX.