PZ Cussons Nigeria Plc has faced a major setback in its financial restructuring efforts after minority shareholders voted against a proposed $34.3 million (N51.8 billion) debt-to-equity conversion during an Extraordinary General Meeting (EGM) held in Abuja over the weekend.
Despite significant support from a portion of the minority shareholders, a key voting bloc opposed the resolution, preventing it from meeting the necessary approval threshold.
The proposed debt conversion was part of the company’s strategy to address the financial pressures caused by Nigeria’s currency devaluation and persistent foreign exchange challenges.
The loan in question was initially issued by PZ Cussons Holdings Limited (PZCH) in June 2022 to assist PZCN in settling foreign currency payables for raw materials and operational costs amidst a severe shortage of foreign exchange.
However, following the sharp depreciation of the naira after the liberalization of Nigeria’s foreign exchange market in June 2023, the company suffered an exchange loss of N157.9 billion. This contributed to a net after-tax loss of N76 billion and a negative shareholders’ equity position of N27.5 billion for the financial year ending May 31, 2024.
Despite achieving solid operational growth, with revenue increasing by 34% and 42% year-on-year for the financial periods ending May 31, 2024, and November 30, 2024, respectively, the ongoing depreciation of the naira further weakened the company’s financial position.
By November 2024, its negative net equity had widened to N34.5 billion.
In response to the EGM outcome, PZCN’s CEO, Dimitris Kostianis, thanked shareholders for their active participation in the decision-making process.
He highlighted that the majority shareholder had revised the conversion terms to reduce debt and raise the conversion price, addressing concerns raised by minority shareholders.
“This adjustment was aimed at limiting dilution for minority shareholders while ensuring compliance with the Nigerian Exchange Group (NGX) requirement of a 20% free float.
“There was strong minority shareholder support, with 663 out of 675 minority shareholders present voting in favor. However, the resolution failed to meet the 75% approval threshold, as 12 minority shareholders, holding a significant shareholding, voted against it. As required by law, the majority shareholder abstained from voting,” Kostianis explained.
He also emphasized the potential benefits of the conversion, stating that it would have protected the company from foreign exchange volatility, strengthened its balance sheet, and provided additional cash flow for investment in sustainable growth initiatives.
Despite the rejection of the proposal, PZCN’s board said it remains committed to finding alternative solutions to restore the company’s net asset position and ensure long-term financial stability.
The company pledged to continue engaging with shareholders and other stakeholders as it navigates its financial challenges.
