Multinational consumer goods conglomerate, PZ Cussons, has initiated a strategic plan to sell its African subsidiaries amid mounting economic challenges.
This includes potential partial or full divestment as the company seeks to mitigate its exposure to the dramatic fluctuations of the naira, which has experienced a staggering 70 percent devaluation.
The British parent company of PZ Cussons Nigeria disclosed these intentions in its preliminary financial results for the year ending May 31, 2024, which were made available on its official website.
The company pointed out that the board has already received several expressions of interest concerning the sale of its African operations.
In a statement, the company noted, “Over the last 12 months, we have made continued operational progress and delivered against the strategic priorities set out at the start of the year, against the backdrop of macro-economic challenges. At the same time, we have taken the important first steps to transform our business and maximise shareholder value, by refocusing our portfolio on where we can be most competitive.”
The significant devaluation of the naira, which has greatly impacted the company’s financial performance, was highlighted as a major factor in this decision.
“The period was marked by a 70 per cent devaluation of the Nigerian naira, which has had significant implications on our reported financials. We have worked hard to mitigate the impact of this on the group, while continuing to serve Nigerian consumers who are facing unprecedented inflation and economic difficulties,” the company stated.
Despite the difficulties faced in Africa, PZ Cussons reported a strong performance in its UK Personal Care division, achieving profitable double-digit revenue growth over the year.
Regarding the potential sale of its African subsidiaries, PZ Cussons acknowledged receiving “a number of expressions of interest for our African business,” recognizing the intrinsic value of its brands and indicating the possibility of a complete or partial sale.
“The favourable trends of the second half of FY24 have continued into the new financial year. We are progressing with our plans to sell St. Tropez and have received a number of expressions of interest for our African business, the potential of our brands and people, which could lead to a partial or full sale, the company stated.
The company remains optimistic about its long-term prospects, emphasizing its focus on building a stronger portfolio of competitive brands.
“Against this backdrop, we remain confident in the long-term potential for PZ Cussons as a business with stronger brands in a more focused portfolio, delivering sustainable, profitable growth,” PZ Cussons expressed in the statement.
The economic impact of the naira devaluation was further elaborated, with the company citing a foreign exchange loss of £107.5 million, largely stemming from the translation and settlement of USD-denominated liabilities in its Nigerian subsidiaries.
“This is wholly the result of the devaluation of the naira, which fell by 70 per cent from May 31, 2023 to May 31, 2024,” PZ Cussons explained.
Back in April, the company’s Chief Executive Officer, Jonathan Myers, revealed that PZ Cussons was reassessing its brand portfolio and geographical presence in light of the ongoing macroeconomic complexities in Nigeria.
This came shortly after the Securities and Exchange Commission rejected PZ Cussons’ proposal to acquire the remaining shares of minority stakeholders in its Nigerian subsidiary.
In September 2023, PZ Cussons had indicated its intention to buy out the remaining 26.73 percent minority stake in PZ Cussons Nigeria Limited at N21 per share. As of May 31, PZ Cussons held a 73.27 percent interest in the subsidiary, translating to 2.90 billion shares valued at N45.53 billion as of September 18.
However, the Nigerian subsidiary has been struggling financially, posting a N94.78 billion loss in the third quarter of the 2023/24 financial year, compared to a profit of N11.213 billion in the same period in 2022.
In the second quarter, the company recorded a loss of N74.14 billion. PZ Cussons Nigeria remains in a negative net asset position, with liabilities exceeding assets by N46.420 billion due to the naira’s depreciation.
Earlier in 2024, the SEC turned down PZ Cussons’ bid to buy out minority shareholders at N23 per share and delist the subsidiary from the Nigerian stock exchange.
In a separate notice posted on the Nigerian exchange website, PZ Cussons announced, “Please note that the company’s closed period, which commenced on September 1, 2024, will remain in effect until 24 hours after the release of the Unaudited Financial Statements for the first quarter ended 31 August 2024, to the market.”
