PZ Cussons Nigeria Plc has provided an explanatory note to its shareholders of on the negative net asset position of the company. This is to be considered at the Extraordinary General Meeting of the Company to be held on Wednesday 13 march 2024, at the Transcorp Hilton, Abuja.
In a notice to the Nigerian Exchange Limited, the Company stated thus:
“Following the preparation of the Q2 2023/2024 unaudited interim financial statements of the Company, the Board noted that the Company had fallen into a negative net asset position.
The ongoing depreciation of the Naira and decrease in volumes of approximately 6% overall resulted in an Operating Loss of N73.8 billion for the first 6 months of the 2023/2024 financial year. In addition, the Company had a foreign exchange loss of N87.0 billion on our foreign currency-denominated trade obligations, negatively impacting our operating result.
The Operating Loss is the key driver of the Company having a negative total equity position of N23.2 billion as of 30 November 2023. As of that day, the Group’s financial liabilities, most of which are denominated in foreign currencies, were at N178.0 billion, while the Total Assets were at N154.8 billion. Following the further devaluation of the Naira post 30 November 2023, it is expected that the Group will incur further material foreign exchange losses in relation to liabilities denominated in foreign currencies. These will be reflected in future results and will likely result in a worsening of the current negative net asset position”.
Extraordinary General Meeting (EGM) of the Company
At the EGM, the shareholders and the directors of the Company may propose and consider the options available to the Company for dealing with the Company’s ongoing negative net asset position.
Proposed Actions
The Board continues to recommend the offer from the Company’s core shareholder, PZ Cussons (Holdings) Limited, to buy out minority shareholders and de-list the company. The offer was increased from ₦21 per share to ₦23 per share as announced on 9 November 2023. The proposed scheme is intended to enable the core shareholder to significantly simplify and strengthen the Company’s operations to allow it to return to longer-term growth.
The Company filed an application with the Securities and Exchange Commission (“SEC”) in November 2023 for its no-objection to the proposed scheme, and the Company is still awaiting the SEC’s no-objection in order to convene a meeting for shareholders to vote on the proposed scheme.
If the Company is not able to obtain the requisite regulatory and shareholder approvals to proceed with the proposed scheme, the Company will be required to explore with its creditors, which are primarily members of the PZ Cussons group, ways to address the Company’s negative net asset position and repay or settle outstanding amounts owing to its creditors. This could include measures such as equity issuance, debt for equity conversion, rights issues, asset sales or similar. Such measures may significantly dilute or otherwise impact existing shareholders.