Harsh economy: Shareholders’ funds wiped out as PZ Cussons Nigeria reports N96.4bn losses in FY 2024
Maureen Aguta
Consumer goods company, PZ Cussons Nigeria reported a net loss of N96.4 billion for the fiscal year ending May 31, 2024, according to information contained in its latest unaudited financial statements.
The losses led the company to post a negative equity of N47.2 billion at the end of the fiscal year.
PZ Cussons has been struggling with macroeconomic headwinds which have negatively affected its margins. High interest rates, exchange rate depreciation and galloping inflation are some of the challenges faced by the company.
Struggles amidst revenue growth
PZ Cussons Nigeria posted a revenue of N152.2 billion during the fiscal year, representing a 33.5% growth from the N114 billion revenue generated in the previous fiscal year.
The company also reported a gross profit of N60.6 billion, representing an 84 per cent increase from the N32.95 billion gross profit posted in the previous fiscal year.
Despite achieving an impressive 40 per cent gross margin during the fiscal year, the group experienced a substantial exchange loss of N158 billion, resulting in a negative operating margin.
Consequently, the group reported an operating loss of N111.5 billion.
The group posted a pre-tax loss of N109 billion, a contrast from the N20.46 billion pre-tax profit posted at the end of the 2022/2023 fiscal year.
Due to its losses, the group enjoyed a tax credit of N12.5 billion, resulting in a net loss of N96.4 billion, down from the N13.3 billion profit after tax posted in FYE 2022/2023.
Key Highlights FY 2024 vs FY 2023
Revenue: N152.2 billion, +34 per cent YoY
Cost of sales: N91.6 billion, +13 per cent YoY
Gross profit: N60.6 billion, +84 per cent YoY
Administrative expenses: N1.3 billion, -84 per cent YoY
Exchange loss: N158 billion, +3090 per cent YoY
Operating profit/(loss): (N111.5 billion), -1456 per cent YoY
Net interest income: N2.2 billion, -55 per cent YoY
(Loss)/Profit before tax: N109 billion, -632 per cent YoY
(Loss)/Profit for the year: N96.4 billion, -772 per cent YoY
Total assets: N137.6 billion, -17 per cent YoY
Commentary
The net loss posted by the group at the end of the fiscal year led to a wiping out of its N34.5 billion retained earnings, leading to retained losses of N53.6 billion at the end of the 2023/2024 fiscal year.
The retained losses accrued by the group have led to a negative equity of N47.2 billion, even as the group looks to delist from the NGX.
During the fiscal year, the group’s net cash declined to N32.7 billion, a 68% decline from the N101.6 billion as at FYE 2022/2023.
The decline in cash and cash equivalents was due to an N87.3 billion negative cash flow generated from operating activities.
PZ Cussons Nigeria’s borrowings from its parent company, PZ Cussons (Holding) Limited, surged to N59.8 billion by the end of the 2023/2024 fiscal year, up from N18.7 billion at the close of the previous year.
This increase is attributed to a $40.26 million non-interest loan facility extended by the parent company to the Nigerian subsidiary in June 2022.
The FX revaluation adjustment resulted in an additional N41.1 billion increase to the original borrowed amount.
PZ Cussons Nigeria delisting
In September 2023, the parent company announced its plan to buy out the remaining 26.73% shareholding of PZ Cussons Nigeria and delist the company from the NGX.
At the time, an offer price of N21 per unit was made to the minority shareholders. However, this price was rejected by certain shareholders who claimed such a price was unfair to them.
In November, the offer price was increased to N23. However, in March 2024, the Securities and Exchange Commission (SEC) declined PZ Cusson’s request to delist from the NGX. A move which was applauded by some of the minority shareholders.
In a statement released in March 2024, the holding company, PZ Cussons (Holding) Limited announced plans to review its Nigerian operations in order to “reduce risk and maximize shareholders value.”