Shares in PZ Cussons took a hit after the consumer goods group warned its business was being weighed down by economic woes in Nigeria.
The owner of Carex handwash, Imperial Leather soap and the St Tropez tanning brand said the devaluation of the country’s currency – the naira – would eat into its profit next year.
The Central Bank of Nigeria this month adjusted its foreign exchange policy to enable the naira to trade freely.
It led to the biggest single-day slump in the currency in its history, declining by nearly a quarter.
PZ Cussons, which has operated in Nigeria for 120 years and sells skin care lotion and baby food there, said every 10 per cent fall in the currency from the rate used in its 2023 results could wipe off £23million of revenue and £3million profit.
Key market: PZ Cussons, which owns Carex handwash, Imperial Leather soap and tanning brand St Tropez said the devaluation of Nigeria’s currency would eat into its profit next year
‘The exchange rates in Nigeria are currently highly volatile,’ it added.
It said that a weaker naira would lead to higher raw material costs for its Nigerian business due to more expensive US imports. The group plans to combat this by raising prices.
Earlier this year Nigeria faced a cash shortage following a delay in rolling out new naira notes after the old ones expired.
Despite the setback, PZ Cussons’ group sales in the three months to the end of May were up 6.7 per cent on the year before.
And sales across the 12 months rose by 6 per cent, marking a third year of revenue growth.
The company said its profit of at least £70million would beat the £68.4million expected by analysts.
Jonathan Myers, chief executive of PZ Cussons, said: ‘While the naira devaluation will have a one-off impact to the group’s near-term reported financial performance, we believe medium to long-term prospects for our Nigerian business will be much improved by the economic reforms being introduced by the new government, the likes of which have not been seen for decades.
Stock Watch – Unbound
Unbound, the parent company of Hotter Shoes, has ended its sales process after it failed to find a buyer.
The group formerly known as Electra Private Equity put itself up for sale in May to raise fresh funds.
But none of the offers were up to scratch and all talks between possible suitors have ended.
It is looking at tapping investors to the tune of between £1.5million and £2million to support a restructuring plan.
Shares tumbled 27.3 per cent, or 0.75p, to 2p.
‘More widely, PZ Cussons has delivered another year of progress against a challenging economic backdrop.’ The shares plunged 6.7 per cent, or 11.8p, to 163.2p.
Russ Mould, investment director at AJ Bell, questioned whether it was worth holding on to the Nigerian business. He said: ‘A sale of this part of the business could aid long-term stability.’
The FTSE 100 rose 0.1 per cent, or 7.88 points, to 7461.66 while the FTSE 250 was down 0.5 per cent, or 80.17 points, to 18,054.84.
BT was a drag on the blue-chip index after UBS lowered the telecom giant’s rating to ‘sell’ from ‘neutral’ and cut the target price to 120p from 146p.
The broker flagged up the impact of rising interest rates and warned BT will have to cut its dividend or face borrowing more than £900million per year over the next three years.
‘Borrowing to fund both the dividend and pension deficit payments when the cost of debt is rising presents risks and we assume a halving of the dividend to 3.85p from 7.7p,’ UBS said. BT fell 3.6 per cent, or 4.65p, to 123p.
Telecom Plus lifted the mood – up 8.7 per cent, or 132p, to 1642p – after the utilities provider’s revenues more than doubled to £2.47billion in the year to the end of May while profit jumped 81 per cent to £85.5million.
The bumper results came as households looked to make savings on utilities such as energy, broadband and insurance.
Cruise firm Carnival gained 10.8 per cent, or 105.7p, to 1080.5p after Morgan Stanley hiked its target price to 900p from 570p.
Braemar clawed back some losses a day after the shipbroker warned it will miss the deadline to publish results amid an investigation into its accounts. Shares inched up 0.5 per cent, or 1p, to 225p.
