PZ Cussons Nigeria Plc (PZCN) has hit a roadblock in its financial restructuring efforts as minority shareholders voted against a proposed $34.3 million (N51.8 billion) debt-to-equity conversion.
The decision was made during an Extraordinary General Meeting (EGM) held in Abuja over the weekend, where a critical voting bloc opposed the transaction, preventing it from securing the necessary approval threshold.
Background of the Debt Conversion Proposal
The proposed conversion was intended to ease financial strain caused by Nigeria’s currency devaluation and ongoing foreign exchange volatility. The loan in question, initially provided by PZ Cussons Holdings Limited (PZCH) in June 2022, was meant to support PZCN in settling foreign currency obligations for raw materials and operational expenses amid persistent forex shortages.
However, following the liberalization of Nigeria’s foreign exchange market in June 2023, the naira depreciated sharply, leading to an exchange loss of N157.9 billion for the company. This depreciation contributed to an after-tax loss of N76 billion and a negative shareholders’ equity position of N27.5 billion for the financial year ending May 31, 2024.
Financial Performance and Ongoing Challenges
Despite impressive operational growth—marked by revenue surges of 34% and 42% year-on-year for the financial periods ending May 31, 2024, and November 30, 2024, respectively—continuous naira depreciation has further weakened PZCN’s financial standing. By November 2024, the company’s negative net equity had expanded to N34.5 billion.
CEO’s Response to the EGM Outcome
PZCN’s Chief Executive Officer, Dimitris Kostianis, expressed appreciation for the shareholders’ participation in the decision-making process. He noted that the majority shareholder had revised the conversion terms, increasing the conversion price and reducing debt exposure to address shareholder concerns. The revision aimed to minimize dilution for minority shareholders while maintaining compliance with the Nigerian Exchange’s (NGX) 20% free float requirement.
“There was overwhelming minority shareholder support, with 663 out of 675 minority shareholders present voting in favor. However, the resolution failed to secure the required 75% shareholding vote, as 12 minority shareholders with significant holdings opposed it. As per legal requirements, the majority shareholder abstained from voting,” Kostianis explained.
Future Outlook
Kostianis emphasized that the proposed debt-to-equity conversion would have shielded the company from forex volatility, strengthened its balance sheet, and freed up cash flow for strategic investments aimed at sustainable growth.
Despite this setback, PZCN’s board remains committed to exploring alternative solutions to restore its net asset position and ensure long-term financial stability. The company also reassured shareholders and stakeholders of its dedication to navigating these financial challenges collaboratively.
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