Months after the exit of multinational giants like Kimberly-Clark, Procter & Gamble (P&G), Unilever, and GlaxoSmithKline from Nigeria, PZ Cussons has revealed its plans to sell its Nigerian subsidiaries.
The British-based consumer goods company is looking to mitigate its exposure to the volatile Nigerian economy, particularly the dramatic 70% devaluation of the naira.
In its preliminary financial results for the year ended May 31, 2024, published on its website, PZ Cussons disclosed that it is considering both partial and full sales of its Nigerian operations.
The company noted that it had received multiple expressions of interest regarding the potential sale of its African business, which includes Nigeria.
The company highlighted the challenging economic environment in Nigeria, citing rising inflation and currency depreciation as significant factors behind its decision.
The 70% devaluation of the naira has severely impacted PZ Cussons’ financial performance, especially with the company incurring foreign exchange losses of £107.5 million, resulting from the settlement of U.S. dollar-denominated liabilities in its Nigerian subsidiaries.
Despite the challenges in Nigeria, PZ Cussons reported positive growth in other markets, particularly in the UK Personal Care segment, which saw double-digit revenue growth during the same period.
The company’s decision to explore the sale of its Nigerian assets comes amid a period of operational transformation aimed at focusing on more competitive markets.
“We have taken the important first steps to transform our business and maximise shareholder value, by refocusing our portfolio on where we can be most competitive,” the company stated.
In addition to the devaluation of the naira, PZ Cussons has faced considerable losses within its Nigerian subsidiary.
The company reported a staggering N94.78 billion loss in the third quarter of the 2023/24 financial year, a sharp contrast to the N11.213 billion profit made in the same period in 2022. In the second quarter of the same fiscal year, the company reported another N74.14 billion loss.
The company’s Nigerian subsidiary has also been operating under a negative net asset position, with liabilities exceeding assets by N46.42 billion.
This financial strain has raised further concerns about the future of PZ Cussons in Nigeria, a market where it once held a significant presence.
In April 2024, the company’s CEO, Jonathan Myers, hinted that PZ Cussons was reviewing its brand portfolio and geographic footprint due to the complexities of doing business in Nigeria.
This statement followed the Securities and Exchange Commission’s rejection of PZ Cussons’ bid to acquire the minority shares in its Nigerian subsidiary.
As of May 31, 2024, PZ Cussons held a 73.27% stake in PZ Cussons Nigeria Plc, representing 2.90 billion shares worth N45.53 billion. The company had previously attempted to purchase the remaining 26.73% of minority shares at N21 per unit in September 2023, but the request was denied by the Nigerian Securities and Exchange Commission.
The potential sale of PZ Cussons’ Nigerian assets marks another chapter in the ongoing exodus of multinational companies from Nigeria, all of which cite economic instability, currency fluctuations, and high inflation as key reasons for scaling back their operations or leaving entirely.
The future of PZ Cussons’ operations in Nigeria remains uncertain as the company navigates these financial challenges and explores opportunities to restructure its business.
However, the company’s willingness to consider a sale signals the increasingly difficult environment for multinational corporations in Nigeria.
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