By Emmanuel Nduka
UK Consumer Goods Company – PZ Cussons is considering selling off its Africa operations, citing adverse economic conditions on the continent, particularly in its largest market Nigeria.
Heritage Times HT reports that rising inflation and currency devaluation over the past year have amplified production costs in Nigeria.
In March, Nigeria’s inflation rate rose to 33.2%, a near-30-year high.
Although the Central Bank of Nigeria’s intervention in the foreign exchange market through weekly sales of dollars to licensed traders has created some stability for the naira’s value, it remains significantly weaker than it was before President Bola Tinubu ascended power in May last year.
PZ’s group revenue from the past three months up till March 2 — which it defines as the third quarter of its financial year — fell by 23.7% “primarily as a result of the devaluation of the Nigerian naira,” the company said last week.
Its Africa business, despite raising product prices to account for inflation, saw its revenue halved during the period. It was a much steeper decline than was recorded in its other markets in Europe and Americas, and the Asia-Pacific, at -1.4% and -10.7% respectively.
After carrying out “a strategic review of our brands and geographies” to focus on where it can be most competitive, PZ’s board described its Africa operations as “a complex group of assets” and is “evaluating the strategic options both to reduce risk and to maximize shareholder value.” It could lead to an outright sale, with CEO Jonathan Myers saying “nothing is ruled out.”
Last year, PZ said it would delist its Nigeria subsidiary from the stock exchange by paying £23 million ($29 million) to buy a 27% stake held by the public. But Nigeria’s securities and exchange regulator barred the buyout move this March, to the delight of Nigerian shareholders who wanted a higher offer for their stock.
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Currently, PZ’s Africa operations spans across the outposts in Ghana and East Africa, but Nigeria is its “largest and most diverse single market”. Its products in Nigeria, where it has operated for over 120 years, range from skincare and sanitary products, like Imperial Leather soap and Morning Fresh dishwashing liquid, to food items such as Mamador cooking oil.
PZ’s exchange rates for calculating its accounts for the 2022, 2023 and 2024 financial years were 558, 536, and 1,400 naira to the British pound respectively. At over 60%, the Nigerian currency’s depreciation over the past year compares unfavorably with the Indonesian rupiah (5.7%) and the US dollar (4.1%).
Unilever, GSK, and Procter & Gamble had considered shutting down or changing their strategy in Nigeria over same factors. While Unilever’s naira revenue between January and March this year grew by 59% on an annual basis, thanks to a 41% increase in prices, a 91% increase in operating costs have led analysts to predict sustained pressures on Unilever’s margins this year.
