Imperial Leather maker PZ Cussons faces hit from Nigerian currency moves

Soap maker PZ Cussons has said that its financial performance could be at the mercy of the Nigerian economy this year as it warned that profit will likely drop.

The business said on Tuesday that a recent devaluation of the Nigerian naira is expected to have a “material adverse impact” on its financial performance in the near term.

The hit from the movement in the currency would have wiped more than £100 million from the Imperial Leather company’s revenue for the last financial year, had it happened a year earlier.

In the course of around a week in June, £1 went from being able to buy around 580 naira to being able to buy around 1,040 naira. It came after the government abandoned a policy which propped up the currency’s value, a move which many market watchers praised.

The business said that if the naira to sterling exchange rate had been as bad in the year to the end of May as it was between July and August this year, adjusted operating profit would have been £58.6 million rather than the £73.3 million that the company made.

The company said that revenue from Africa would have been around £103 million lower.

Unsurprisingly therefore, this year’s profits are expected to be hit by the devaluation as well. Adjusted operating profit is expected to be within the range that the markets expect of between £61.5 and £68.2 million, a drop of up to 16%.

Revenue rose 10.7% in the year to the end of May, the business said, with pre-tax profit falling 4.2% to £61.8 million.

Chief executive Jonathan Myers said: “We have delivered a third consecutive year of like-for-like revenue growth and increased operating profit by over 10% since launching our strategy nearly three years ago.

“We have achieved these improvements by investing in our brands and capabilities, serving cost-conscious consumers better with targeted innovation and productivity initiatives helping us to reduce complexity across the group.”