PZ Cussons PLC is reconsidering its brand and market strategies due to the adverse effects of the weakening Nigerian Naira on its product sales in Nigeria.
In addition to Africa, the company operates in Europe, the Americas, and the Asia-Pacific region.
Jonathan Myers, CEO of PZ Cussons, stated in the company’s trading update for the first quarter ended March 2024 that the company aims to maximize shareholder’s profit by reshaping their product portfolio, essentially seeking more profitable markets.
The company, boasting of its capabilities, reiterated its financial outlook for 2024 (FY24), asserting that they remain aligned with their revenue projections.
However, despite asserting that it has experienced improved revenue growth in Q1 and witnessed a rise in sales volume, the company still faults Nigeria’s economic landscape, stating that there are considerable challenges and complexities within Nigeria’s economic landscape that would hinder their profitability.
Therefore, in order to address these challenges and unlock its full potential, PZ Cussons has initiated a strategic review of its brands and geographic operations. They plan to optimize their portfolio by focusing on areas where they can compete effectively, aiming to maximize resources and market competitiveness.
The Company’s CEO, Jonathan Myers highlighted the importance of redirecting resources to geographies where the company can thrive, aiming for higher profits and better returns on investment.
According to the report, the company derives over 30 percent of its sales from Africa as of the first quarter of 2024. However, this represents a significant decline of 48 percent compared to the same period last year. Despite this decline, the company experienced a 6.4% growth in revenue on a like-for-like (LFL) basis in the first quarter.
The overall revenue decline of 23.7% as reported by PZ Cussons is primarily attributed to the devaluation of the Nigerian Naira. The devaluation, which averaged 60% lower during the quarter compared to the previous year, had a significant impact on the company’s financial performance in Nigeria.
PZ Cussons stated that maintaining profitability in Nigeria has been challenging due to the need to raise product prices to offset inflationary costs caused by foreign exchange fluctuations. They emphasize the need to enhance profitability, increase cash flow, and remain competitive amid significant currency volatility.
PZ Cussons reported that over the past 10 months, they have brought back approximately £35 million in cash from Nigeria to their home country. They anticipate repatriating an additional £15-20 million by the end of May. Additionally, the company implemented various operational strategies that allowed their Nigerian business to generate enough funds to sustain itself without relying heavily on external sources.
As a result of these efforts, the group’s overall gross debt has decreased significantly. They project that by the end of the fiscal year 2024, their gross debt will fall within the range of £160 to £180 million, down from £251 million recorded at the end of the previous fiscal year (FY23). This reduction in debt indicates improved financial health and better management of financial resources by the company.
PZ Cussons emphasized that they have conducted a thorough strategic review and have concluded that operating in Nigeria presents significant challenges that outweigh the company’s capacity. They explained that their financial and human resources were stretched too thinly across their operations in Nigeria, making it difficult to achieve consistent profitability.
In response to these findings, the company’s board has decided to streamline its operations by focusing on areas where they can compete most effectively. This strategic shift aims to optimize resources and enhance competitiveness to generate better returns.
As part of this restructuring effort, PZ Cussons Nigeria sought to acquire the shares of minority shareholders. However, their request was declined by the Securities and Exchange Commission (SEC) in March. If the acquisition had been approved, PZ Cussons Nigeria would have been removed from the Nigerian Exchange Group (NGX), formerly known as the Nigerian Stock Exchange.
