PZ Cussons Nigeria PLC (PZCN) has announced a strategic decision to convert $34.26 million of its outstanding shareholder loan into equity in a bid to strengthen its balance sheet and reduce exposure to foreign exchange volatility.
The company disclosed this decision through a statement signed by Alsec Nominees Limited, its company secretary, and published on the Nigerian Exchange (NGX) on February 15, 2025.
Background and Financial ChallengesPZ Cussons Holdings Limited (PZCH) initially extended a $40.26 million loan to PZCN in June 2022 to mitigate operational and raw material procurement challenges exacerbated by foreign currency shortages. However, following the liberalization of Nigeria’s foreign exchange market in June 2023, the Naira suffered significant devaluation, severely impacting PZCN’s financial performance.
The company reported an unrealized exchange loss of N157.9 billion, a negative shareholders’ equity of N27.5 billion, and continued losses that deepened its net equity to N34.5 billion as of November 30, 2024. Despite recording revenue growth of 34% and 42% year-on-year for the full and half financial year periods ending May 31, 2024, and November 30, 2024, respectively, currency depreciation continued to weigh heavily on its financial health.
Loan-to-Equity Conversion PlanTo address these financial difficulties, PZCN’s Board of Directors has resolved to convert $34.26 million (N51.8 billion) of the loan into equity at N23.60 per share, effective February 12, 2025. The conversion will result in the issuance of 2,194,716,637 new ordinary shares valued at 50 kobo each, increasing the company’s share capital by N1.1 billion. These shares will have the same rights as existing shares.
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With this conversion, PZCH’s stake in PZCN will rise from 73.27% to 82.79%. Other shareholders will experience a proportional dilution in their holdings: CardinalStone’s stake will drop from 4.91% to 3.16%, AMCON & PFA’s from 1.56% to 1.01%, and other shareholders from 20.25% to 13.04%.
Regulatory Approvals and Shareholder MeetingThe conversion plan is subject to shareholder approval and regulatory clearance from the Securities and Exchange Commission (SEC) before new shares can be registered on the NGX. An Extraordinary General Meeting (EGM) has been scheduled for March 13, 2025, at the Transcorp Hilton, where the Board will present the proposal for approval.
Strategic ImplicationsAccording to the Board, this move aims to strengthen PZCN’s balance sheet, reduce its exposure to foreign exchange fluctuations, improve financial ratios, restore a positive net asset position, and boost investor confidence.
The remaining $6 million of the shareholder loan will still be payable to PZCH under the existing terms, which the Board considers favorable compared to prevailing lending rates in Nigeria.
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