• Tuesday, July 16, 2024
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PZ Cussons yet to confirm Nigeria’s exit

PZ Cussons repatriated £35m in ten months on fiscal reforms

PZ Cussons, a major British manufacturer, is yet to confirm the media reports that it is exiting Africa.

BusinessDay reached out to the Nigerian arm of the company through an email after Bloomberg reported on Thursday that the group indicated plans that it may leave Africa after sales plunged in its Nigeria operation. The company acknowledged the email and promised to get back promptly.

In Africa’s most populous nation, the company sells a range of products including Morning Fresh dishwashing liquid, refrigerators and cooking oil. The devaluation of the naira means sales fell sharply in pound terms. It also stoked inflation which has hit consumers’ purchasing power.

In March, regulators rejected PZ Cussons’s application to buy out the 27 percent of its Nigerian arm that it does not own, in order to delist it. The regulator said the offer price of N23 per share was unfair.

“We have made significant progress in strengthening PZ Cussons in recent years – building brands, restoring capabilities and re-energising and professionalising the organisation,” Jonathan Myers, chief executive officer of PZ Cussons said in its latest trading update report.

“Today we are reiterating our full year 24 outlook, having delivered improved LFL revenue growth in Q3 on an improved volume trend. Nevertheless, the macro-economic challenges and complexities associated with operating in Nigeria are significant and there is much more to do to unlock the full potential of the business,” he said.

He added that PZ Cussons have undertaken a strategic review of their brands and geographies and have embarked on plans to transform its portfolio, refocusing on where the business can be most competitive.

“The actions we are taking will crystallise value for our investors from assets better suited to alternative ownership structures. This will enable us to invest our resources in the key geographies and categories in which we can win and generate superior returns. We are transforming PZ Cussons into a business with stronger brands in a more focused portfolio, delivering sustainable profitable growth.”

The report highlighted that revenue declined by 23.7 percent primarily as a result of the devaluation of the Nigerian naira, which was on average 60 percent lower in the quarter compared to the prior year period.

Volume grew 0.2 percent and compared favorably to the first half decline of 4.9 percent, due to improved momentum in our UK brands. Excluding Africa, LFL revenue declined 2.9 percent, an improved trend compared to the H1 decline of 3.9 percent.

“In Africa we continued to increase prices in the quarter, seeking to offset significant FX-driven cost inflation. Despite this, we saw an improving volume trend as a result of ongoing distribution gains and successful marketing activity,” the firm said.

“The operational focus remains on improving profitability and maximising cash generation whilst remaining competitive and navigating significant volatility in the Naira,” PZ Cussons stated.

The group also revealed that it had repatriated approximately £35 million from Nigeria as a result of its fiscal policy changes.

It said it has made further progress in reducing its financial leverage as a result of ongoing repatriation of funds from Nigeria to the UK and its ongoing programme to divest non-trading assets.

“In the first ten months of this financial year, the group has repatriated approximately £35 million of cash from Nigeria and expects to repatriate a further £15-20 million before the end of May,” PZ Cussons said.

“This improvement has been underpinned by fiscal policy changes in Nigeria, providing improved access to US Dollars, and by other operational initiatives enabling our Nigerian business to be self-funding.

“Group gross debt has reduced further and is expected to end of the full year 2024 in the £160 to £180 million range, down from £251 million as at the end of full year 2023. This would result in headroom on our Group banking facilities being at least £145 million, compared to £73 million as at the end of full year 2023,” it said.

The firm stated that as a result of the ongoing programme of operational simplification, “we have identified more non-trading assets to be divested. These include manufacturing facilities and land no longer required in Thailand and Indonesia and a number of properties across Africa.

“Proceeds will be received throughout the full year 2025 and, combined with continued operational free cash flow generation, are anticipated to further meaningfully reduce gross debt,” it stated.