In a stark illustration of the economic challenges gripping Nigeria, PZ Cussons Nigeria has reported a net loss of N96.4 billion for the fiscal year ending May 31, 2024.
This daunting figure was revealed in the company’s latest unaudited financial statements, underscoring the severity of the macroeconomic headwinds it faces.
PZ Cussons Nigeria’s financial woes are a reflection of the broader economic landscape. The company has been grappling with high interest rates, a depreciating exchange rate, and rampant inflation—factors that have collectively eroded its profit margins. Despite these challenges, the company managed to post a revenue of N152.2 billion, marking a 33.5% increase from the N114 billion recorded in the previous fiscal year. This revenue growth, however, was not enough to offset the substantial financial losses incurred.
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Revenue Growth Amidst Mounting Losses
The company’s gross profit soared to N60.6 billion, an impressive 84% increase from the N32.95 billion reported in the previous year. Achieving a 40% gross margin is noteworthy, yet it was overshadowed by a colossal exchange loss of N158 billion. This loss turned what could have been a profitable year into one marked by a negative operating margin and a subsequent operating loss of N111.5 billion.
A closer look at the financial figures reveals the depth of the crisis. PZ Cussons Nigeria’s net loss eradicated its retained earnings of N34.5 billion, resulting in retained losses of N53.6 billion by the end of the fiscal year. Consequently, the company reported a negative equity of N47.2 billion. The group’s net cash also dwindled to N32.7 billion, a steep 68% decline from N101.6 billion at the close of the previous fiscal year, driven primarily by an N87.3 billion negative cash flow from operating activities.
The financial strain led PZ Cussons Nigeria to increase its borrowings from its parent company, PZ Cussons (Holding) Limited, to N59.8 billion by the end of the fiscal year, up from N18.7 billion the previous year. This surge was largely due to a $40.26 million non-interest loan facility extended by the parent company in June 2022, with an FX revaluation adjustment adding N41.1 billion to the original amount borrowed.
Delisting Controversy
In September 2023, PZ Cussons’ parent company announced plans to buy out the remaining 26.73% shareholding of its Nigerian subsidiary and delist from the Nigerian Exchange Group (NGX). The initial offer of N21 per unit was rejected by minority shareholders, prompting an increase to N23 per unit in November. However, the Securities and Exchange Commission (SEC) declined the delisting request in March 2024, a decision that received support from some minority shareholders.
In response, PZ Cussons (Holding) Limited announced a strategic review of its Nigerian operations to mitigate risks and maximize shareholder value.
Nigeria’s growing economic headwinds
PZ Cussons Nigeria’s financial troubles mirror the broader economic difficulties faced by many businesses and individuals in the country. Firms across various sectors are grappling with similar challenges, including high operational costs, volatile exchange rates, and inflationary pressures. These conditions have led to reduced profit margins, increased borrowing costs, and operational inefficiencies.
For instance, companies in the consumer goods, telecommunications, and oil sectors have reported declining profits and increased financial strain. The economic instability has forced many businesses to scale back investments, lay off employees, and in some cases, exit the Nigerian market entirely.
The uncertainty surrounding the economic environment has also deterred new foreign investments, further impacting the growth and development of the Nigerian economy.
Business leaders say the economic trajectory has created an urgent need for the government to address the underlying economic issues affecting businesses and citizens.