PZ Cussons cuts earnings and profit forecasts due to foreign exchange problems
- PZ Cussons now expects adjusted operating profits of between £55 million and £60 million this year
- The company’s shares were the largest decliners on the FTSE 250 index on Wednesday morning
PZ Cussons shares fell on Wednesday morning after the group cut its earnings and profit forecasts, as it continues to suffer from the depreciation of the Nigerian naira.
The owner of Imperial Leather now expects adjusted operating profits to reach £55m to £60m in the current financial year, against consensus forecasts of £61.5m to £68.2m.
PZ Cussons shares Its shares fell 16.4 per cent, or 21p, to 107p by 10am, making it the FTSE 250’s top loser by some distance.
Reduced forecast: Imperial Leather owner PZ Cussons now expects adjusted operating profits of between £55m and £60m in the current financial year
CEO Jonathan Myers said the weakening value of the naira, which has fallen 70 percent over the past year, is “the most significant challenge we have faced to date.”
Last week, Nigeria devalued its currency for the second time in eight months as part of plans to reform the exchange rate system and attract more foreign investment into the country.
PZ Cussons does not expect a “significant rebound” in the value of the naira, so it has decided to cut the interim dividend by 44 percent to 1.5 per share.
“While we continue to make good progress in managing this volatility, additional devaluation in recent weeks will inevitably impact FY24 results,” Myers said.
“We, as a board, have taken the prudent step to reduce the interim dividend in light of the currency depreciation.”
In the six months to December 2, naira depreciation contributed to foreign exchange losses of £88.2 million and a reduction in PZ Cussons’ net assets of £150.6 million.
As a result, the Manchester-based company slumped to a statutory operating loss of £89.7m, after making a profit of £39.2m the previous year.
Revenue also fell by 17.8 per cent to £277.1 million despite rising on a like-for-like basis for the ninth consecutive quarter, partly due to higher prices.
Turnover was also impacted by lower demand for Cussons Baby products in Indonesia, as well as a weaker Indonesian rupiah and Australian dollar.
Across Europe and the Americas, turnover fell marginally to £97.2 million due to lower purchases from the Sanctuary Spa and St Tropez beauty brands offsetting growth at Childs Farm and the UK personal care businesses.
Founded in Sierra Leone 140 years ago, PZ Cussons’ other brands include Carex and Original Source handwash, baby food maker Rafferty’s Garden, and Morning Fresh dishwashing liquid.
“We continue to believe that PZ Cussons management can achieve a material turnaround in the quality of the group’s earnings but acknowledge that recent Nigerian events have delayed progress towards this goal,” analysts at Numis said.
(tags for translation) Daily Mail