PZ Cussons Nigeria PLC (PZCN) has encountered a significant hurdle in its financial restructuring plan after minority shareholders voted against converting a $34.3 million (N51.8 billion) intercompany loan into equity.
The decision was reached at the company’s Extraordinary General Meeting (EGM) held in Abuja at the weekend.
Despite strong backing from many minority shareholders, a key voting bloc opposed the transaction, preventing it from meeting the required approval threshold.
The proposed debt conversion aimed to address financial pressures resulting from Nigeria’s currency devaluation and ongoing foreign exchange challenges.
The loan in question was originally issued by PZ Cussons Holdings Limited (PZCH) in June 2022 to help PZCN settle foreign currency payables for raw materials and operational costs amid severe forex shortages.
However, following the naira’s sharp depreciation after the liberalisation of Nigeria’s foreign exchange market in June 2023, the company suffered an exchange loss of N157.9 billion.
This contributed to the N76 billion after-tax loss and a negative shareholders’ equity position of N27.5 billion for the financial year ended May 31, 2024.
Despite achieving impressive operational growth with revenue increasing 34 per cent and 42 per cent year-on-year for the financial periods ending May 31, 2024, and November 30, 2024, respectively continuous naira depreciation has further weakened the company’s financial position.
By November 2024, its negative net equity had widened to N34.5 billion.
Reacting to the EGM outcome, PZ’s Chief Executive Officer, Dimitris Kostianis expressed gratitude to shareholders for their engagement in the decision-making process.
He noted that the majority shareholder had revised the conversion terms to reduce debt and increase the conversion price in response to shareholder concerns.
This adjustment aimed to limit minority shareholder dilution while ensuring compliance with the NGX’s 20 per cent free float requirement.
“There was very strong minority shareholder support, with 663 out of 675 minority shareholders present voting in favour. However, the resolution failed to secure the required 75 per cent shareholding vote, as 12 minority shareholders representing a significant shareholding voted against it. In line with legal requirements, the majority shareholder abstained from voting,” Kostianis explained.
He further emphasised the potential benefits of the conversion, stating that it would have shielded the company from foreign exchange volatility, strengthened its balance sheet, and freed up cash flow for productive investments to drive sustainable growth.
Despite the setback, PZCN’s board assured of its commitment to finding alternative solutions to restore the company’s net asset position and ensure long-term financial stability.
The company also pledged to continue engagement with shareholders and stakeholders as it navigates the financial challenge. [The Guardian]
