PZ Cussons cuts dividend, warns on profits over naira’s fall

PZ Cussons, the consumer goods company behind brands like Carex and Imperial Leather, issued a profit warning and cut its interim dividend today, citing the significant devaluation of the naira.

The naira has weakened by 70% compared to last year and 30% since December, impacting PZ Cussons’ Nigerian operations heavily. As a result, the company now forecasts full-year adjusted operating profit at £55-60 million, down from previous expectations of £61.5-68.2 million.

First-half revenues also dropped 17.8% to £277.1 million, with £52.9 million of the decline attributed solely to the naira devaluation. While like-for-like revenues saw a 2.2% increase, the overall financial picture suffers due to currency fluctuations.

To counter rising costs in Nigeria, PZ Cussons implemented “significant” price increases and expanded its store reach. However, these measures are not enough to fully offset the impact of the weakening naira.

In light of the revised profit outlook, the company also cut its interim dividend from 2.67 pence per share to 1.5 pence per share.

“As we set out in September 2023, macroeconomic developments in Nigeria would be the key determinant of the FY24 results,” said Jonathan Myers, Chief Executive Officer of PZ Cussons. “Whilst we continue to make good progress in managing this volatility, the further devaluation in recent weeks will inevitably impact our FY24 results.”

PZ Cussons’ performance hinges on the stabilization of the naira and the effectiveness of its countermeasures. The revised profit forecast and dividend cut reflect a cautious outlook, potentially impacting investor sentiment. The company’s ability to navigate the challenging Nigerian market will be crucial for its future success.

“The most significant challenge we have faced by far has been the devaluation of the Nigerian naira, which is today around 70% weaker than a year ago, representing the biggest drop in the currency’s history,” CEO Myers said.

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Last September, PZ Cussons announced it was delisting its Nigeria unit from the Nigerian stock exchange after it bought out 26.73 percent stake in the company held by minority shareholders.

The UK-headquartered company offered all other shareholders ₦21 per share. The firm said it believed the offer to be attractive for minority shareholders in Nigeria, particularly given the “recent macroeconomic developments and foreign exchange challenges.”

PZ Cussons has been present in Nigeria since 1899. The personal care company has a major market in Nigeria where it sells detergent, soap, cosmetics, refrigerators, freezers and air conditioners products.