Onome Amuge
PZ Cussons has clawed back into profitability in Nigeria after two punishing years of exchange rate losses, but the rebound masks a deeper balance sheet crisis that underlines the difficulties facing multinationals in Africa’s fourth largest economy.
The maker of Imperial Leather soap and Morning Fresh washing liquid reported an after-tax profit of N10 billion for the year ending May 2025, reversing a record loss of more than N90 billion the previous year. The return to profit was driven largely by a collapse in foreign exchange losses, which dropped from N158 billion in 2024 to N7.8 billion this year.
But the company’s Nigerian subsidiary remains locked in negative equity, with accumulated losses of nearly N39 billion and liabilities exceeding assets by more than N27 billion. Years of retained earnings have been wiped away, and the capital base remains impaired despite the headline turnaround.
The timing could hardly be worse. The UK parent, PZ Cussons Group, has signalled plans to exit Nigeria after decades of operating in the country, citing an unpredictable policy environment and the destabilising effects of naira devaluation. But with net assets in negative territory and the local currency trading at historic lows, any sale is expected to yield only a fraction of the value investors might have realised two years ago.
Nigeria’s liberalisation of its currency regime in 2023 triggered the highest depreciation in the naira’s history. For companies such as PZ Cussons that import raw materials in dollars and sell in naira, the shock was devastating.
Revenue for the 2024/25 financial year grew by almost N60 billion to N212.6 billion, but the increase reflected inflationary price pass-throughs rather than volume expansion. Costs ballooned, with the cost of sales consuming 73 per cent of turnover, up from 64.4 per cent a year earlier. Gross profit fell to N3.7 billion, a margin of just 27 per cent.
The challenge for consumer-facing businesses is particularly concerning, with households squeezed by inflation are trading down to cheaper products, while companies still face dollar-linked input costs.
For the UK-based group, Nigeria has historically been a jewel in its portfolio. The country accounted for a significant share of the African market, which in turn contributed nearly 30 per cent of global turnover. But that contribution has dwindled as the naira’s devaluation eroded the dollar value of Nigerian revenues and two years of stagnant volumes sapped growth.
The company’s balance sheet shows that total assets of N169 billion are now eclipsed by liabilities, compared with a healthier N166 billion position just two years earlier. Equity capital, once a buffer against volatility, is firmly in deficit.
The group’s planned exit raises difficult questions for investors. In stronger currency times, Nigeria represented a profitable long-term bet. Today, the subsidiary’s diminished dollar valuation means any disposal will crystallise losses.
PZ Cussons is not alone. Other multinationals, from consumer brands to oil companies, are reassessing their Nigerian exposure. Those with dollar-linked revenues, such as in the financial sector, have weathered the storm more effectively. But consumer goods companies, tied to naira-denominated sales, have borne the brunt.
While the fall in foreign exchange losses lifted PZ Cussons back into the black, the underlying business has yet to demonstrate structural improvements. Operating expenses remain elevated, gross margins have shrunk, and revenue growth is inflation-driven rather than volume-led.
According to industry analysts, the rebound currently offers little assurance of sustainability. Without a deeper overhaul, from local sourcing of inputs to tighter cost controls,the return to profit looks like a temporary reprieve rather than a lasting turnaround.
