PZ Cussons slashes dividend and profit forecast on FX woes

PZ Cussons shares slumped on Wednesday morning after the group cut its earnings forecast and dividend, as it continues to suffer the devaluation of Nigeria’s naira.

The Imperial Leather owner now expects adjusted operating profits of £55million to £60million in the current financial year, against consensus forecasts for £61.5million to £68.2million.

PZ Cussons shares sunk 16.4 per cent, or 21p, to 107p by 10am, making them the biggest faller on the FTSE 250 Index by some distance.

Reduced forecast: Imperial Leather owner PZ Cussons now expects adjusted operating profits of £55million to £60million in the current financial year

Chief executive Jonathan Myers said the weakening naira, which has depreciated by 70 per cent over the past year, is the ‘most significant challenge we have faced by far’.

Last week, Nigeria devalued its currency for the second time in eight months as part of plans to overhaul its exchange rate system and attract more overseas investment to the country.

PZ Cussons does not anticipate a ‘significant rebound’ in the naira’s value, so it has decided to slash its interim dividend payout by 44 per cent to 1.5 per share.

Myers said: ‘Whilst we continue to make good progress in managing this volatility, the further devaluation in recent weeks will inevitably impact our FY24 results.

‘As a board, we have taken the prudent step to reduce the interim dividend in light of the devaluation.’

In the six months ending 2 December, the naira’s drop in value contributed to foreign exchange losses of £88.2million and a £150.6million fall in net assets for PZ Cussons.

As a result, the Manchester-based firm plummeted to an £89.7million statutory operating loss, having made a £39.2million profit the previous year.

Revenue also declined by 17.8 per cent to £277.1million even though it rose on a like-for-like basis for the ninth consecutive quarter, partly because of price hikes.

Turnover was further hit 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 decreased marginally to £97.2million due to fewer purchases of beauty brands Sanctuary Spa and St Tropez offsetting growth in its Childs Farm and UK personal care businesses.

Founded in Sierra Leone 140 years ago, PZ Cussons’s other brands include Carex and Original Source handwash, baby food maker Rafferty’s Garden, and dishwashing liquid Morning Fresh.

Analysts at Numis said: ‘We continue to believe in the potential of PZ Cussons management to deliver a material transformation in the quality of earnings for the group but acknowledge recent Nigerian events have delayed progress towards this goal.’

This post first appeared on Dailymail.co.uk