Soap manufacturer PZ Cussons has stated that its financial performance for the year 2024 will be adversely affected by the “recent devaluation of the Naira” and further warning that profit will most likely decline.
The company expressed its concern in its latest financial result for the year ending May 31st, 2023, where it grew its revenue by 10% with pre-tax profit falling 4.2% to £61.8 million.
The statement read,
- “In light of the recent devaluation of the Naira, which is expected to adversely affect the Group’s financial results in FY24, the Board is recommending a final dividend of 3.73 pence which is unchanged on the previous year.”
- “We have operational and corporate plans in place to mitigate these challenges and are already executing a number of these to improve the performance of the business and to optimize the Group’s cash position”.
The company noted that its unchanged dividend for the year 2023 was a result of the naira devaluation and projects the policy to impact its performance in the near term.
Impact of naira devaluation on PZ’s profit
The company noted that if it had calculated its profits using the exchange rate between July and August after the CBN unified exchange rates, its operating profit would have declined by £ 14.7 million to £58.6 million rather than the £73.3 million it reported.
However, the company noted it has grown its revenue for the third consecutive year amidst macroeconomic challenges in many regions where it operates.
Its Chief Executive Officer (CEO) Jonathan Myers said,
- “We have delivered a third consecutive year of like-for-like revenue growth and increased operating profit by over 10% since launching our strategy nearly three years ago.”
Decline in EPS
The company’s basic Earnings Per Share (EPS) dropped by 10.7% from 12.57p in the financial year of 2022 to 11.23p in 2023.
The company attributed the drop in EPS to the effects of tax charges from Nigeria and non-controlling interest.
The statement reads,
- “Continued profitable revenue growth in Nigeria contributed to the Group’s 12.6% growth in adjusted profit before tax but the impact of the resulting tax charge and increased non-controlling interest led to an adjusted EPS decline of 10.7%.”
Cash flow
The company reported a cash flow of £ 69.9 million compared to the £ 58.0 million it reported in 2022.
However, the statement noted that unremitted built-up cash trapped in its Nigeria entity amounts to £200 million of which it is finding it difficult to repatriate.
The statement reads,
- “Cash flow remained strong, with free cash flow of £69.9 million (FY22: £58.0 million) primarily driven by improved working capital.
- Our adjusted net cash was £5.7 million. This includes cash of approximately £200 million within Nigerian entities which has been built up as a result of the challenges in repatriating cash outside of the country”
