Challenges in Africa have continued to hurt PZ Cussons. Currency headwinds in Nigeria sent the group tumbling into the red, the Imperial Leather and Carex owner announced this week, in results for the year ended 31 May 2024.
As revenues plummeted, PZ Cussons also lowered operating profit expectations for FY25 to £47m-£53m as the impact of the movement of the Nigerian naira remained uncertain.
Investors sold off the stock in response to the results, sending shares tanking 15% to 87.5p on Wednesday. The stock is down more than 41% so far this year as the personal care group attempts to right the ship.
A 70% drop in the naira sent the bottom line swinging from a pre-tax profit of £61.8m in FY23 to losses of £95.9m, on revenues down 20% to £527.9m.
A 44% reduction in dividends to 3.6p a share also failed to impress the markets.
CEO Jonathan Myers said the group had “worked hard” to mitigate the impact of the Nigerian currency devaluation on the group, and added he remained confident in the long-term potential for sustainable, profitable growth.
PZ Cussons flagged it had moved a step closer to selling off its troubled African business following the launch of a strategic review in April, with a number of expressions of interest. Plans to flog St Tropez were also “progressing”, the group added.
Myers also pointed to “significantly improved” trading in the UK personal care business, as Carex returned to growth and Original Source, Imperial Leather and Childs Farm all enjoyed a year of double-digit revenue growth.
He added that “favourable trends” experienced in the second half of FY24 had continued into the new financial year.
Patrick Folan of Barclays said it was “hard to get too excited” on PZ Cussons, as the uncertainty around naira clouded visibility on operating profit expectations, and a beauty destock in the US partially offset momentum in the wider UK personal care business.
“Portfolio transformation via the potential sales of St Tropez and Africa is progressing but nothing tangible to report leaves us wanting more,” Folan added.
However, Matthew Webb of Investec called the interest in Africa ‘encouraging’ and said PZ Cussons would not have made the statement unless these were credible approaches.
“We are cautiously optimistic that local players will have a more positive view of PZ Cusson’s assets in Nigeria than the UK stock market,” he added.
AJ Bell investment director Russ Mould worried that Myers, who has been at the helm since 2020, would be under pressure to deliver meaningful change and soon.
“The current situation of having its results consistently marred by the devaluation of the naira feels unsustainable with the shares trading near 12-month lows. Shareholders also have to deal with the added sting of a big drop in the dividend, which won’t do anything for their patience,” he said.
He added: “There were some signs of progress in the background, with the company reducing its debt pile, and it did see volume growth in the fourth quarter. However, partly due to accounting changes related to preparing the African unit for sale, the company faces even greater sensitivity to the naira in the current financial year.
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