PZ Cussons at crossroads over N73.8bn operating loss, directors seek bailout options

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Pz cussons
  • Equity market sheds N258bn on selloffs in blue chip stocks

The board of directors of PZ Cussons Plc has expressed worry over the current financial situation of the company.

Figures from the unaudited financial statements of the conglomerate for the period ended November 30 2024, showed that it recorded an operating loss of N73.8 billion.

The board blamed the loss on the ongoing depreciation of the Naira and a decrease in volumes of approximately 6 percent.

In addition, the Company had a foreign exchange loss of N87.0 billion on its foreign currency-denominated trade obligations, negatively impacting its operating result.

According to the board, “The Operating Loss is the key driver of the Company having a negative total equity position of N23.2 billion as of 30 November 2023. As of that day, the Group’s financial liabilities, most of which are denominated in foreign currencies, were at N178.0 billion, while the Total Assets were at N154.8 billion.”

At the moment, the board is thinking of ways to settle its creditors as a result of a huge debt owed.

“Our payables denominated in foreign currencies have increased significantly in recent years, primarily as a result of our inability to source foreign currency to repay our suppliers and other providers of credit. We have benefited from extended payment terms and other support from our affiliated companies, and as a result, the majority of our trade payables are owed to other members of the PZ Cussons group,” the company explained.

It would be recalled that the board of PZ had announced the plan to delist from the Exchange as it seeks a buyout of minority shareholders by the core shareholder.

As a result, the Company filed an application with the Securities and Exchange Commission (“SEC”) in November 2023 for its no-objection to the proposed scheme, and the Company is still awaiting the SEC’s no-objection in order to convene a meeting for shareholders to vote on the proposed scheme. However, the request has not been granted by the SEC.

“The Board continues to recommend the offer from the Company’s core shareholder, PZ Cussons (Holdings) Limited, to buy out minority shareholders and de-list the company. The offer was increased from N21 per share to N23 per share as announced on 9 November 2023. The proposed scheme is intended to enable the core shareholder to significantly simplify and strengthen the Company’s operations to allow it to return to longer-term growth.

“If the Company is not able to obtain the requisite regulatory and shareholder approvals to proceed with the proposed scheme, the Company will be required to explore with its creditors, which are primarily members of the PZ Cussons group, ways to address the Company’s negative net asset position and repay or settle outstanding amounts owing to its creditors. This could include measures such as equity issuance, debt for equity conversion, rights issues, asset sales, or similar. Such measures may significantly dilute or otherwise impact existing shareholders,” PZ noted in a statement.

Following the further devaluation of the Naira post-30 November 2023, it is expected that the Group will incur further material foreign exchange losses in relation to liabilities denominated in foreign currencies.

These will be reflected in future results and will likely result in a worsening of the current negative net asset position.

Equity market sheds N258bn on selloffs in blue chip stocks

In a related development, opening the week, the local bourse slipped 0.40 percent as the benchmark Index settled at 104,663.34 points.

Sell offs in blue-chip stocks of telcos and banks was a major reason for the drop.

Telco heavyweight, MTN Nigeria Plc, lost (-7.58%) of its share value alongside GTCO (-3.72%) and Zenith Bank Plc (-1.76%).

The losses offset gains in the recently listed Transcorp Power Plc which added (+0.79%), FBNH (+8.92%) and UBA (+4.73%).

As a result, the ASI year-to-date return fell to 39.97 percent, while the market capitalization shed N238.54 billion to close at N59.18 trillion.

Analysis of Monday’s market activities showed trade turnover settled higher relative to the previous session, with the value of transactions up by 115.75 percent.

A total of 287.45million shares valued at N10.80 billion were exchanged in 9,077 deals. UBA (+4.73%) led the volume chart with 46.23 million units traded while Transcorp Power Plc (+0.79%) led the value chart in deals worth N3.63 billion.

Market breadth closed positive at a 1.59-to-1 ratio with advancing issues outnumbering the declining ones. ABCTRANS (+9.86%) topped twenty-six (26) others on the leader’s table while DAARCOMM (-0.71%) sixteen (16) others on the laggard’s log.