6 days ago
22
PZ Cussons Nigeria Plc has announced plans to convert a N51.79 billion ($34.26 million) intercompany loan from its UK-based parent company, PZ Cussons Holdings (PZCH), into equity as part of a financial restructuring strategy.
In a document published on the Nigerian Exchange Limited (NGX) on Saturday, but dated February 13, 2025, the company stated that 2.19 billion new ordinary shares at N23.60 per share will be issued to PZCH. The decision was approved at a special board meeting on February 13.
According to the manufacturer of personal healthcare products, the conversion will increase PZ Cussons Nigeria’s share capital from N1.99 billion to N3.08 billion.
The company explained that the move is aimed at reducing its debt burden and strengthening its financial position amid economic challenges in Nigeria.
However, the conversion is subject to shareholder approval at an extraordinary general meeting (EGM) scheduled for March 13, 2025.
PZ Cussons Nigeria outlined the strategic advantages of the loan-to-equity conversion, emphasising its potential to create value for shareholders and other stakeholders.
“Strengthening the balance sheet allows future operating cash flows to be allocated more strategically towards value-creating opportunities that align with the company’s growth objectives,” the company stated.
The company further highlighted that the conversion would significantly reduce its exposure to foreign exchange risks, thereby mitigating future losses and improving its net asset position.
“It will materially reduce the company’s exposure to foreign exchange risk and its potential impact on company earnings, thus reducing future foreign exchange losses and further deterioration of the company’s net asset position,” PZ Cussons said.
Additionally, the company noted that the restructuring would enhance its financial ratios, including debt-to-equity and coverage ratios, potentially improving its financial standing and creditworthiness.
“It will improve the company’s financial ratios, such as debt-to-equity and coverage ratios, potentially enhancing the company’s financial standing and creditworthiness.”
PZ Cussons also emphasised that the conversion would restore the company to a positive net asset position, strengthening its overall financial health.
The company disclosed that PZCH had initially provided a $40.26 million intercompany loan to its Nigerian subsidiary in June 2022 to settle outstanding foreign currency payables. The loan was primarily used to cover costs related to raw material imports, operations, and other essential expenses.
PZ Cussons explained that the funding was necessitated by limited foreign exchange availability, which made it challenging to meet financial obligations. However, following Nigeria’s foreign exchange market liberalisation in June 2023 and the continued depreciation of the naira, the company’s financial position was significantly impacted.
“The Naira value of its foreign currency-denominated loans has increased significantly, resulting in an unrealised exchange loss of N157.9 billion, a loss after tax of N76.0 billion, and a negative shareholders’ equity position of N27.5 billion for the financial year ended May 31, 2024,” the company stated.
Despite strong operational growth—reporting a 34 percent revenue increase for the full financial year ending May 2024 and 42 percent for the half-year period ending November 2024—further naira depreciation has continued to erode profits.
“The adverse revaluation impact on the foreign currency loans has resulted in losses after tax and a worsened negative net equity position of N34.5 billion as of November 30, 2024,” PZ Cussons stated.
Following extensive discussions, the company’s board and PZCH agreed that converting a portion of the outstanding loan into equity was the most effective option to stabilise the company’s financial position.
“The board and PZCH, after extensive discussions, agree that the conversion of a portion of the outstanding loan amounting to $34.26 million into equity is the most efficient option to strengthen the company’s balance sheet and significantly reduce exposure to further foreign exchange losses,” PZ Cussons said.
After the conversion, the company confirmed that the remaining shareholder loan balance of $6 million would remain payable.
Boluwatife Enome
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