- PZ Cusson Nigeria Plc said it expects Nigeria’s economic reforms to negatively impact its financial returns in the short term.
- The company anticipates a reduction in revenues, profits, and share earnings due to the expected devaluation of the Naira and other policy changes.
- PZ Cussons plans to mitigate the increased costs of raw materials through competitive pricing, and believes that the long-term prospects for its Nigerian business will improve as a result of the economic reforms.
Consumer goods giant PZ Cusson Nigeria Plc has said that it expects the economic reforms of Nigeria’s new administration to hurt the financial returns of its business in Nigeria, albeit in the short term.
Referring specifically to the expected effect of the liberalisation of the currency market, Chief Executive Officer Jonathan Myers said, “the Naira devaluation will have a one-off impact on the Group’s near-term reported financial performance.”
Impact of economic reforms on the company’s finance
The company noted that in monetary terms, it expects a reduction in its 2023 financial report, revenues, profits, and share earnings. Part of the guidance released by the company earlier today said:
- “As a sensitivity, every 10% devaluation in the Naira from the rate used to translate the FY23 income statement is estimated to result in a £23m reduction in revenue, £3m reduction in adjusted operating profit, and 0.5 pence reduction in adjusted earnings per share
The imperial leather manufacturer further assured that it can endure the macroeconomic shocks resulting from the new policies of the federal government.
- “We believe the medium-to-long-term prospects for our Nigerian business will be much improved by the economic reforms, currently being introduced by the new government the likes of which have not been seen for decades.”
PZ Cussons’ plan to offset the cost
Regarding the cost of raw materials, which is set to increase, the firm noted that it hopes to offset this through competitive pricing as it has successfully done in the past.
- “While the devaluation of the Naira will result in higher raw material costs for our Nigeria business, reflecting the higher cost of USD imports, we expect to largely offset this through mitigating actions such as pricing, as successfully demonstrated over the last two years,” the company said.
Financial standing of PZ Cussons
Today, the company reported its like-for-like revenue growth for the fourth quarter of 2023 at 6.7%. This represents a 6.1% growth for the 2023 financial year.
The group estimates its revenue for the fiscal year 2023 to be in the region of £655 million. The consumer goods giant also projects its profit before tax to be around £70 million.
The backstory
Businesses in diverse sectors of the economy have been reacting to the new macroeconomic reforms of President Tinubu’s administration.
On his inauguration, President Tinubu announced the end of the much-beleaguered fuel subsidy regime. The Central Bank under his watch also announced the unification of all foreign exchange markets in the country.
Experts and industry players have noted that the reforms have both positive and negative impacts on the manufacturing sector. However, it is hoped in the long run, the overall economy benefits.
