PZ Cussons, maker of Carex soap and Imperial Leather, says it will lose millions in revenue and profits from the devaluation of the naira following recent reforms by the Nigerian government.
The UK-headquartered personal care company has a major market in Nigeria where it sells detergent, soap, cosmetics, refrigerators, freezers and airconditioners products.
The Central Bank of Nigeria weeks ago removed restrictions and allowed the naira to trade more freely, resulting in the biggest fall slump in the value of currency.
On Monday, naira closed at the official Investors and Exporters window at N768.17 to a dollar, down from about N460 it traded before the reform.
The company reported N87 billion as revenue and N11.2 billion profit in its third quarter that ended 28 February 2023, according to regulatory filings.
– Key forecast to note
PZ Cussons said every 10% devaluation in the naira is estimated to result in a revenue cut by £23 million (N22.4 billion) and profit decline by £3 million (N2.9 billion) in its full year report.
“As a sensitivity, every 10% devaluation in the Naira from the rate used to translate the FY23 income statement is estimated to result in a £23m reduction in revenue, £3m reduction in adjusted operating profit, and 0.5 pence reduction in adjusted earnings per share,” Cussons said.
It said it will use price increase to offset higher material costs for its Nigeria business due to more expensive imports from the U.S. as a result of a weaker naira.
But PZ Cussons said the naira reform will be positive in the longer term.
– Learn more
“While the naira devaluation will have a one-off impact to the group’s near-term reported financial performance, we believe the medium to long-term prospects for our Nigerian business will be much improved by the economic reforms, currently being introduced by the new government, the likes of which have not been seen for decades,” CEO Jonathan Myers said.
The company said its revenues jumped by 6% in the year to the end of May, compared with the previous year.
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