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PZ Cussons to Sell St Tropez, May Exit Africa

Embattled by weak demand and currency issues in Nigeria, the company is looking to slim down in order to return to growth.
Embattled by weak demand and currency issues in Nigeria, the company, which owns Original Source and St. Tropez, is looking to slim down in order to return to growth.

PZ Cussons Plc put its Africa business under review, potentially pivoting away from the region in which it was founded to invest in its remaining business and pay down debt.

The British soap maker was set up in Sierra Leone 140 years ago and now gets almost 30 percent of its sales from Africa, even after a 48 percent decline over the past year. With annual sales of around £500 million ($622 million), it’s spread across many geographies and product lines. It also operates in Europe, the Americas and the Asia-Pacific region.

“We have to have an eye on the future as well as a respect for the past,” chief executive officer Jonathan Myers said. “There could be many permutations of the outcome, which could include a change in ownership.”

“We’re going to be objective and not emotional in how we make this decision,” he added. The company’s shares rose 5 percent on Wednesday, but they’re down 50 percent over the past 12 months.

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PZ Cussons also plans to sell fake tan brand St. Tropez. It said the label has grown significantly since the company bought it in 2010, adding that significant long-term growth potential remains in the US and new markets. It could be worth £100 million, Investec analyst Matthew Webb said in a note.

The company will focus on branded items for babies, as well as beauty and hygiene products, Myers said, citing recent acquisition Childs Farm which makes toiletries for babies with sensitive skin as an example. UK, Australia, New Zealand and Indonesia are Myers’ priority markets.

Following a strategic review, the board has decided that on top of the difficulties in Nigeria, the company is too complicated for its size. In a financial update, it cited “financial and human resources spread too thinly to generate consistent returns.”

In Nigeria the company sells a range of products including Morning Fresh dishwashing liquid, refrigerators and cooking oil. The devaluation of the naira means sales fell sharply in pound terms. It also stoked inflation which has hit consumers’ capacity to spend.

In March, regulators rejected PZ Cussons’s application to buy out the 27 percent of its Nigerian arm that it doesn’t own, in order to delist it. The regulator said the offer price of 23 naira was unfair.

By Dasha Afanasieva

Learn more:

PZ Cussons Sees Lower Profit as Africa Challenges Mount

The owner of Imperial Leather, Original Source and St Tropez has been struggling to turn around its African business, which contributes over a third of its revenue.

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