Equity Base Eroded By PZ Cussons’ Mounting N74bn Exchange Losses

445


PZ Cussons Nigeria Plc has traded at huge losses for the past two quarters that heaped a loss of over N74 billion at the half year on mounting foreign exchange losses.

The consumer goods manufacturing and marketing company has piled up foreign exchange losses so far in its 2023/24 financial year ending May amounting to N87 billion in the half year. The figure is well more than its sales revenue of N68 billion for the period.

The company’s interim financial report at the end of its half-year ended November 2023 shows a sudden downturn in fortune from a sustained upturn in earnings for the third straight year in 2023 – its best earnings year on record that delivered an after-tax profit of over N14 billion.

The company’s otherwise stable operational momentum is destabilised by the mounting foreign exchange losses in the current financial year.

The second quarter added N42.6 billion to the first quarter’s foreign exchange losses of N44.4 billion and also swelled the net loss from N38.6 billion in the first quarter to over N74 billion at half-year.

The numbers are against a modest net foreign exchange loss of N2.7 billion and an after-tax profit of N7.7 billion for the company in the same period in the preceding financial year.

The loss has punctured and drained off the company’s shareholders’ funds – which has plunged from N48.4 billion at the end of the previous financial year to a negative of over N23 billion at half year.

Loss of equity has necessitated increased borrowings and accumulation of other liabilities. Interest-bearing debts are up two and half times to over N59 billion and trade payables have risen by over 40 per cent to N112 billion on year-on-year reading.

Without the foreign exchange losses, the company would have been on the path of strong profit growth for the year. PZ Cussons has seen impressive growth records in group sales over the past three years and management has reined in production and marketing costs to stretch out margins.

Sales revenue is up by 19 per cent to N68 billion at half year while input cost slowed down relatively at an increase of 5.7 per cent to N46 billion over the same period. The good combination of growing sales and slowing production costs powered an increase of 61.4 per cent in gross profit to almost N22 billion.

Additional cost savings were extracted from selling and distribution expenses that increased by 15.8 per cent to N6.8 billion and a write back on trade receivables. Administrative costs however went up by about 53 per cent to close at over N5 billion in half year.

The entire gross profit and cost savings were more than consumed by the foreign exchange loss. They left an operating loss of N77 billion against an operating profit of N1.5 billion in the same period in 2022.

Interest earnings are maintaining an upside force for the third year running, jumping about two and half times year-on-year to over N4 billion at the end of half-year operations.

Interest expenses advanced from insignificance to stand more than N1 billion at half year in reflection of the company’s rising debt profile. Net finance cost still grew from N1.7 billion to over N3 billion over the period.

PZ Cussons ended its half-year trading with a pre-tax loss of N73.8 billion and an after-tax loss of N74 billion, down from pre-tax profit of over N9 billion and an after-tax profit of N7.7 billion in the same period in the preceding year.

The company lost N18.67 per share at the end of half year, down from earnings per share of N1.93 in the same period in 2022. It closed the 2023 financial year with earnings per share of N3.28.

Comments are closed.