British-based consumer goods company PZ Cussons Plc has announced the proposed sale of its Nutricima Nigeria dairy business.
In a statement, the company said it has exchanged contracts for the sale of the assets associated with Nutricima’s business to FrieslandCampina WAMCO Nigeria Plc, an affiliate of Royal FrieslandCampina in the Netherlands. Under Nigerian law, completion of the transaction is subject to merger clearance in Nigeria, the statement read.
Speaking on the proposed sale, Caroline Silver, Executive Chair of PZ Cussons Plc said: “The proposed sale of Nutricima and the sale of Luksja are further steps forward under our ‘Focus, Scale and Accelerate’ strategy, as we continue to streamline the Group to focus investment on core Personal Care and Beauty brands. This will enable us to deliver higher-margin earnings, in geographies which can scale, and support the return of the Group to sustainable, profitable growth.”
The company’s dairy business has faced low consumer demand and intense competition following Nigeria’s recession of 2014 to 2017.
The dairy business was created in 2003 in a joint venture between PZ Cussons Nigeria Plc and Irish dairy firm Glanbia where they agreed to build a facility in Nigeria to supply evaporated milk and milk powder to the Nigerian market. In 2009, a second facility for the manufacture of UHT products was opened.
However, in 2015, Glanbia exited the joint-venture, selling its 50% stake to PZ Cussons Nigeria Plc.
The British parent company has issued numerous profit warnings since March 2018, noting that its Nigerian business was facing weak sales due to significant cost inflation of recent years which had put the consumer’s discretionary income under pressure. As a result, inventory levels in the trade remained high leading to intense competition, particularly in its milk segment, resulting in lower volumes, prices and margins.
In light of the challenges, the company said it had drawn up plans to re-assess the structure of the group’s operating model to further reduce the overhead base; review its product cost with a focus on areas such as packaging reduction; review the group’s Nigerian milk business with an objective of returning it to profitability.
The latest challenge to the group’s dairy business came in July 2019 when the Central Bank of Nigeria (CBN) placed restrictions on foreign exchange availability to milk producers to import milk forcing the company to source foreign exchange in a costly black market.
PZ Cussons Nigeria Nutricima dairy brands include Nunu, Olympic and Coast milk.
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