Imperial Leather maker says Nigeria currency slump to hit finances

The maker of Carex soap and Imperial Leather has warned that currency volatility in Nigeria could shave millions off its revenue and profits in a one-off hit to its finances.

PZ Cussons, the Manchester-based personal care giant which has a major market in Nigeria, told investors its near-term financial performance would be impacted by the devaluation of the naira.

Earlier this month, Nigeria’s central bank changed foreign exchange policy to remove complex trading restrictions on the official market, allowing the naira to trade freely.

It led to the biggest single-day slump in the currency in its history, declining nearly a quarter, according to reports.

PZ Cussons said that every 10% devaluation in the naira, from the rate used in its 2023 full-year income statement, is estimated to result in a £23 million reduction in revenue and a £3 million decline in its adjusted operating profit.

It could also shave 0.5p off its adjusted earnings per share, and slash its cash balance by about £20 million.

A weaker naira is expected to lead to higher material costs for the group’s Nigeria business due to more expensive US imports, but this would be largely offset by price rises, the company said.

But PZ Cussons said the move to liberate the currency will be positive in the longer term.

It follows a period of volatility earlier in the year, sparked by elections and the botched rollout of new banknotes after the old ones expired.

Jonathan Myers, its chief executive officer, said: “While the naira devaluation will have a one-off impact to the group’s near-term reported financial performance, we believe the medium to long-term prospects for our Nigerian business will be much improved by the economic reforms, currently being introduced by the new government, the likes of which have not been seen for decades.”

The company, which also owns beauty brands including St Tropez and Sanctuary Spa, revealed its revenues jumped by 6% in the year to the end of May, compared with the previous year.

Its adjusted pre-tax profit is expected to hit at least £70 million for the year, helped by a strong performance in Africa despite the currency troubles, it said.

Mr Myers added: “We have continued to transform the business and build brands for the long term, while responding to the day-to-day challenges of cost inflation and meeting the needs of the cost-conscious shopper.

“This has resulted in a third consecutive year of like-for-like revenue growth in the 2023 financial year.