- PZ Cussons now expects an adjusted operating profit of £55-60 million this year
- The company’s shares were the biggest fallers on the FTSE 250 on Wednesday morning
Shares of PZ Cussons fell on Wednesday morning after the group cut its profit forecast and dividend, as the group continues to suffer from the devaluation of the Nigerian naira.
Imperial Leather’s owner now expects adjusted operating profit of £55m to £60m in the current financial year, compared to consensus expectations of £61.5m to £68.2m.
PZ Cussons shares fell 16.4 per cent, or 21 cents, to 107 cents by 10am, making them by some distance the biggest faller on the FTSE 250 Index.
Downgraded forecast: Imperial Leather owner PZ Cussons now expects adjusted operating profit of £55 million to £60 million in the current financial year
CEO Jonathan Myers said the weakening naira, which has been devalued by 70 percent in 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 overhaul its exchange rate system and attract more foreign investment into the country.
PZ Cussons does not expect a “significant recovery” in the value of the naira and has therefore decided to reduce the interim dividend payout by 44 percent to 1.5 per share.
Myers said: ‘While 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 sensible step to reduce the interim dividend in light of the devaluation.’
In the six months ended December 2, the depreciation of the naira contributed to exchange losses of £88.2 million and a £150.6 million decline in net assets for PZ Cussons.
As a result, the Manchester-based company fell to a statutory operating loss of £89.7 million, after posting a profit of £39.2 million the previous year.
Sales also fell 17.8 percent to £277.1 million, although they rose for the ninth quarter in a row on a like-for-like basis, partly due to price increases.
Sales were further hit by lower demand for Cussons Baby products in Indonesia, as well as a weaker Indonesian rupiah and a weaker Australian dollar.
Across Europe and the Americas, sales fell marginally to £97.2m due to reduced purchases from beauty brands Sanctuary Spa and St Tropez, which offset growth in the personal care business in Childs Farm and the UK.
Founded 140 years ago in Sierra Leone, PZ Cussons’ other brands include Carex and Original Source handwash, baby food maker Rafferty’s Garden and Morning Fresh dishwashing liquid.
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 recognize that recent events in Nigeria will hamper progress towards this delayed the target.’