A multinational firm, PZ Cussons, has announced an £88.2m foreign exchange loss arising from the devaluation of the naira.
PZ Cussons Chief Executive Officer, Jonathan Myers, in a statement on Wednesday, said that the impact of the Nigerian unit devaluation on its bottom line was significant.
He said, “The most significant challenge we have faced by far has been the devaluation of the Nigerian naira, which is today around 70 per cent weaker than a year ago, representing the biggest drop in the currency’s history.
As we set out in September 2023, macroeconomic developments in Nigeria would be the key determinant of the FY24 results. 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, which produces brands like Carex and Imperial Leather, also delivered a profit warning to shareholders about its profit and cut its interim dividend by nearly half as a result of a significant slide in the Nigerian naira in the first half.
Myers said the company was taking the “prudent step” to cut its dividend in light of the results, with the half-year payout falling to just 1.5 pence per share, down from 2.67p previously.
“The devaluation of the Nigerian naira has had a significant impact on our financial results and comparisons to the prior year. The foreign exchange loss in the period was £88.2m and was wholly the result of the devaluation of the naira, which fell by 51 per cent between May 31, 2023, and December 2, 2023.
“Statutory results show an operating loss of £89.7m on having been materially impacted by these foreign exchange losses. Revenue declined by 17.8 per cent (£59.8m ) to £277.1m of which £52.9m was attributable to the naira devaluation.
Given the material financial impact of the naira devaluation, the board has determined it is prudent to reduce the interim dividend by 44 per cent to 1.50p,” the firm said.
Also, the firm had adjusted its forecast full-year operating profit at reported rates of exchange to be in the range of £55-60m for the 12 months to May 31, 2024, which is lower than £73.3m in the previous year.
“At our FY23 full-year results in September, we noted that the Nigerian macroeconomic environment and the currency, particularly, would be the key determinant of FY24 results.
Since then, we have experienced further depreciation of the naira, with the official rate falling more than 30 per cent since our balance sheet date of December 2. As a result, we now expect FY24 adjusted operating profit, at reported rates of exchange, to be in the range of £55-60m,” it said.
The impact of the naira was significant on PZ Cussons because PZ’s Nigerian business represents 35 per cent of the company’s revenue and 22 per cent of its net assets for FY 2023.
Since the unification of the foreign exchange market in June companies across different industries have reported FX losses on their balance sheets.