PZ Cussons, the British Fast-Moving Consumer Goods (FMCG) company, has cut profit expectations for 2024 due to the impact of the naira devaluation on its Nigerian business.
The British health and beauty manufacturer cut its dividend following a 70 percent decline in the value of the naira, which it said has had a “significant” impact on its trading this year.
The company’s share price tumbled 17.65 percent Wednesday, according to data from the London Stock Exchange.
Read also: PZ Cussons says over 60,000 shareholders have unclaimed dividends
“As we set out in September 2023, macroeconomic developments in Nigeria would be the key determinant of the full-year 24 results,” Jonathan Myers, chief executive officer said.
“Whilst we continue to make good progress in managing this volatility, the further devaluation in recent weeks will inevitably impact our full-year 24 results,” Myers said.
“As a board, we have taken the prudent step to reduce the interim dividend in light of the devaluation,” Myers said.
In an update to markets, PZ said that because the naira has lost so much of its value, it will only pay an interim dividend of 1.50p in April, 44 percent less than analysts had expected.
PZ also said its revenue declined nearly 18 percent to £277m, down from £337m in the first half of 2023.
PZ’s Nigeria business makes up 35 percent of revenue and 22 percent of net assets.
According to its fiscal year ended August 2023, PZ Cusson Nigeria recorded a loss after tax of N38.64 billion for its fiscal year from a profit of N1.30 billion recorded in 2022.
PZ Cusson now sees adjusted operating profit in the range of £55 million ($69 million) to £60 million for fiscal 2024, compared to a range of £61.5 million to £68.2 million previously, it said Wednesday.
The devaluation of the Naira in June 2023 caused quite a shock in the Nigerian business environment with many companies accruing losses due to their foreign exchange exposures.
Nigerian president Bola Tinubu’s reforms including the removal of petrol subsidy and naira devaluation, implemented in the second quarter of the year, pushed the inflation rate to the highest level in 20 years.
The naira has plunged to record lows across markets since the central bank allowed it to weaken by as much as 40 percent against the dollar in June.
Over the past seven years, several manufacturers, especially in the fast-moving consumer goods industry, have either left the country or stopped production of some of their products as a result of the difficult operating environment.
Problems such as rising interest rates, surging inflationary pressure, and foreign exchange volatility are impacting input costs, operating expenses and the general profitability of businesses in Africa’s most populous nation.
FCMG companies recorded foreign exchange loss amounting to N269.50 billion in the first nine months of 2023 from N13.56 billion in the same period of 2022.
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