PZ Cussons Losses N96.4bn To Negative Equity In The Fiscal Year

PZ Cussons Nigeria, a consumer goods company, reported a substantial net loss of N96.4 billion for the fiscal year ending May 31, 2024, as per its latest unaudited financial statements. This significant loss resulted in the company having a negative equity of N47.2 billion at the fiscal year’s end.

The company has been grappling with challenging macroeconomic conditions, including high interest rates, currency depreciation, and rampant inflation, all of which have adversely impacted its margins.

Despite these difficulties, PZ Cussons Nigeria saw revenue growth, posting N152.2 billion for the fiscal year, a 33.5% increase from the N114 billion recorded in the previous year. The company also achieved a gross profit of N60.6 billion, an 84% rise from the N32.95 billion in the prior year.

This growth in revenue and gross profit highlights the company’s ability to generate sales and maintain profit margins, even in a challenging economic environment.

Furthering, a significant exchange loss of N158 billion, driven by the depreciation of the Nigerian naira against major foreign currencies, led to a negative operating margin, resulting in an operating loss of N111.5 billion. The high exchange loss reflects the company’s exposure to foreign currency risk, particularly due to its importation of raw materials and the impact of fluctuating exchange rates on its financial performance.

The group reported a pre-tax loss of N109 billion, a sharp contrast from the N20.46 billion pre-tax profit in the 2022/2023 fiscal year. Due to its losses, the group received a tax credit of N12.5 billion, leading to a net loss of N96.4 billion, down from a net profit of N13.3 billion in the previous year.

This drastic turnaround from profit to loss underscores the severe financial challenges the company is facing.

Key financial highlights for FY 2024 compared to FY 2023 include:

• Revenue: N152.2 billion, up 34% year-on-year
• Cost of sales: N91.6 billion, up 13% year-on-year
• Gross profit: N60.6 billion, up 84% year-on-year
• Administrative expenses: N1.3 billion, down 84% year-on-year
• Exchange loss: N158 billion, up 3090% year-on-year
• Operating profit/(loss): (N111.5 billion), down 1456% year-on-year
• Net interest income: N2.2 billion, down 55% year-on-year
• (Loss)/Profit before tax: N109 billion, down 632% year-on-year
• (Loss)/Profit for the year: N96.4 billion, down 772% year-on-year
• Total assets: N137.6 billion, down 17% year-on-year

The net loss wiped out the group’s N34.5 billion retained earnings, resulting in retained losses of N53.6 billion at the fiscal year’s end. This led to a negative equity of N47.2 billion as the group plans to delist from the Nigerian Stock Exchange (NGX). The group’s net cash dropped to N32.7 billion, a 68% decrease from N101.6 billion in the previous fiscal year, primarily due to an N87.3 billion negative cash flow from operating activities.

This decline in cash and cash equivalents highlights the strain on the company’s liquidity and its ability to fund ongoing operations.

Borrowings from the parent company, PZ Cussons (Holding) Limited, increased to N59.8 billion by the end of FY 2024, up from N18.7 billion the previous year. This rise is attributed to a $40.26 million non-interest loan provided by the parent company in June 2022, with an FX revaluation adjustment adding N41.1 billion to the borrowed amount. The increase in borrowings underscores the financial support needed from the parent company to sustain the Nigerian subsidiary’s operations amidst economic challenges.

In September 2023, the parent company announced plans to buy out the remaining 26.73% shareholding of PZ Cussons Nigeria and delist the company from the NGX. Initially, an offer price of N21 per share was made but was rejected by some shareholders as unfair.

Following the national brand news, the offer was later increased to N23 per share. However, in March 2024, the Securities and Exchange Commission (SEC) denied PZ Cussons’ request to delist, a decision welcomed by some minority shareholders.

The delisting plans and subsequent rejection by the SEC indicate the company’s ongoing efforts to restructure and the pushback from minority shareholders who seek fair value for their investments.

In March 2024, PZ Cussons (Holding) Limited stated it would review its Nigerian operations to “reduce risk and maximize shareholder value.”

This review is likely to include measures to improve operational efficiency, reduce costs, and mitigate currency risk. The company’s future strategies might involve diversifying its product portfolio, exploring new markets, and enhancing local sourcing to reduce dependency on imports and foreign currency exposure.

Overall, PZ Cussons Nigeria’s financial performance in FY 2024 reflects the significant challenges posed by the Nigerian economic environment. The company’s ability to navigate these challenges and implement effective strategies will be crucial for its future stability and growth.