High interest rates, naira devaluation push PZ Cussons Nigeria to N96bn loss

Key Points

• PZ Cussons Nigeria suffered a massive N96.4 billion net loss for the fiscal year ending May 2024.
• The company blames high interest rates, currency depreciation, and inflation for the loss.
• Revenue grew 33.5% to N152.2 billion, but a large foreign exchange loss wiped out profits.
• PZ Nigeria has negative equity and dwindling cash reserves.
• A delisting attempt by the parent company was rejected, but a review of Nigerian operations is planned.

 

PZ Cussons Nigeria Plc, a leading consumer goods company, has reported a staggering net loss of N96.4 billion for the financial year ending May 31, 2024, resulting in a negative equity of N47.2 billion.

Economic Pressures

PZ Cussons has been grappling with severe macroeconomic pressures, including soaring interest rates, exchange rate depreciation, and rampant inflation, which have severely squeezed its profit margins.

Revenue and Profitability

Despite a notable 33.5 per cent increase in revenue, climbing to N152.2 billion from N114 billion in the previous year, the company struggled to maintain profitability.

Gross profit rose by 84 per cent to N60.6 billion, yet the company suffered an enormous exchange loss of N158 billion. This led to a negative operating margin and an operating loss of N111.5 billion.

The pre-tax loss stood at N109 billion, a dramatic reversal from the N20.46 billion pre-tax profit in 2023. The net loss for the period was N96.4 billion, a sharp decline from the N13.3 billion profit after tax recorded in 2023.

Cash Flow and Borrowings

Additionally, PZ Cussons Nigeria’s cash and cash equivalents plummeted by 68 per cent to N32.7 billion, driven by a negative cash flow of N87.3 billion from operating activities.

Borrowings from its parent company, PZ Cussons (Holding) Limited, surged to N59.8 billion, mainly due to a $40.26 million non-interest loan facility and FX revaluation adjustments.

Delisting Plans and Future Strategy

In September 2023, PZ Cussons (Holding) announced plans to buy out the remaining 26.73 per cent shareholding of PZ Cussons Nigeria and delist the company from the NGX. However, the Securities and Exchange Commission (SEC) denied the delisting request in March 2024. Subsequently, the Holding Company declared intentions to review its Nigerian operations to mitigate risks and enhance shareholder value.

PZ Cussons continues to navigate through these economic challenges, aiming to stabilise its financial standing and restore investor confidence.

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