Shareholders pull plug on PZ Cussons Nigeria’s $34m loan conversion

Minority shareholders of PZ Cussons Nigeria Plc (PZCN) have thwarted the company’s plan to convert $34.26 million (N51,79bn) of the outstanding intercompany loan amount owed to its parent, PZ Cussons (Holdings) Limited (PZCH), into equity.

The company said on Friday that while there was strong minority shareholder support for the transaction at its extraordinary general meeting on Thursday, a significant minority shareholder bloc voted against it and the approval threshold was not met.

It said the debt conversion was proposed to resolve challenges stemming from Nigeria’s currency devaluation and historical forex liquidity challenges. In June 2022, PZCH advanced an intercompany loan of $40.26 million to help PZCN settle foreign currency payables for raw materials and operational costs due to the ongoing forex scarcity.

Following the liberalisation of the foreign exchange market in June 2023 and subsequent naira devaluation, the foreign exchange debt position drove an exchange loss of N157.9 billion, resulting in a N76.0 billion loss after tax and a negative shareholders’ equity position of N27.5 billion for the financial year ended 31 May 2024, according to a statement.

The company said a further devaluation of the naira worsened the negative net equity position to N34.5 billion as of 30 November 2024.

“As a response to shareholder feedback received during the meeting, the majority shareholder amended the proposed conversion terms to reduce the level of debt to be converted and increase the conversion price, which would have reduced minority shareholder dilution and also ensured that the company remained compliant with the 20% free float requirement,” CEO Dimitris Kostianis said.

The company pointed out that by converting the intercompany loan into equity, its exposure to foreign exchange volatility would have been curbed, balance sheet strengthened, and future cash flow freed up to be allocated to productive investments that support the its “profitable and sustainable growth ambitions”.

“This would have established the basis for improving shareholder liquidity,” it said. “The Board of PZCN remains committed to building on the strong operational growth we have seen in H1 of FY25, exploring alternative mechanisms for restoring our net assets to a positive position and to working closely with our shareholders and the broader stakeholder ecosystem during this process.”