PZ Cussons, a British fast-moving consumer goods company, has cut profit expectations for 2024 due to the impact of the naira devaluation on its Nigerian business.
The health and beauty manufacturer cut its dividend following a sharp 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.
“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,” he added.
He said the board has taken the prudent step to reduce the interim dividend in light of the devaluation.
In an update to markets, PZ noted 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.
The company said its revenue declined nearly 18 percent to £277 million, down from £337 million in the first half of 2023.
Its Nigerian 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 an after-tax loss of N38.64 billion for its fiscal year from a profit of N1.30 billion in 2022.
PZ Cussonnow 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.
Last September, PZ Cussons Nigeria announced plans to delist from the Nigerian Stock Exchange.
The devaluation of the naira in June 2023 caused quite a shock in the business environment with many companies accruing losses due to their foreign exchange exposures.
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 at least 20 years.
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.