‘Easing debt burden!’ PZ Cussons Converts ₦51.79bn Debt into Equity

OwelekeTV — Business PZ Cussons Nigeria Plc has announced plans to convert a ₦51.79 billion ($34.26 million) intercompany loan from its UK-based parent company, PZ Cussons Holdings (PZCH), into equity. This move is part of a broader financial restructuring aimed at strengthening the company’s financial position amid Nigeria’s economic challenges.

The company disclosed the development in a document published on the Nigerian Exchange Limited (NGX) on Saturday, dated February 13, 2025. It revealed that 2.19 billion new ordinary shares would be issued to PZCH at ₦23.60 per share, increasing PZ Cussons Nigeria’s share capital from ₦1.99 billion to ₦3.08 billion.

This decision, approved at a special board meeting on February 13, is still subject to shareholder approval at an extraordinary general meeting (EGM) scheduled for March 13, 2025.

Rationale Behind the Debt-to-Equity Conversion

PZ Cussons Nigeria emphasized that the move would ease its debt burden, enhance financial stability, and create value for shareholders.

“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 conversion is also expected to mitigate the company’s exposure to foreign exchange risks, which have significantly impacted earnings.

“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 added.

Additionally, the restructuring will improve key financial metrics, including debt-to-equity and coverage ratios, potentially boosting the company’s creditworthiness.

Impact of Forex Challenges on PZ Cussons Nigeria

The debt-to-equity conversion follows financial struggles triggered by Nigeria’s foreign exchange crisis. In June 2022, PZCH provided a $40.26 million intercompany loan to its Nigerian subsidiary to settle foreign currency obligations tied to raw material imports, operations, and other expenses.

However, the liberalization of Nigeria’s forex market in June 2023, alongside the continued depreciation of the naira, significantly affected the company’s financial position.

“The Naira value of its foreign currency-denominated loans has increased significantly, resulting in an unrealized exchange loss of ₦157.9 billion, a loss after tax of ₦76.0 billion, and a negative shareholders’ equity position of ₦27.5 billion for the financial year ended May 31, 2024,”

PZ Cussons disclosed.

Despite achieving strong revenue growth—34% for the full financial year ending May 2024 and 42% 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 ₦34.5 billion as of November 30, 2024,”

the company further explained.

Following extensive discussions, the board and PZCH concluded that converting a portion of the outstanding loan—$34.26 million—into equity was the most effective way to stabilize the company’s balance sheet and minimize forex-related losses.

After the conversion, the remaining $6 million shareholder loan will remain payable.