PZ Cussons (LSE: PZC) shares have made for a terrible investment for more than a decade.
While growth has often disappointed, what nearly broke the investment case was Nigeria, where the company still generates a significant proportion of its sales. Repeated currency devaluations turned what might have been a straightforward consumer staples stock into a highly volatile proposition.
Today (17 June), however, the company surprised the market by revealing that profits for FY26 are expected to come in at the top end of expectations.
More importantly, management said measures introduced to reduce exposure to future Nigerian naira swings are continuing to work.
After years of setbacks, could this finally be the start of a comeback?
Why investors lost faith
PZ Cussons owns several well-known brands, including Imperial Leather, Carex and St Tropez. Yet despite operating in the relatively defensive consumer goods sector, the company has spent much of the past decade destroying shareholder value.
To understand why today’s update matters, investors first need to understand what went wrong.
Part of the problem was that growth simply failed to materialise. While rivals invested heavily behind their brands and expanded into new categories, PZ Cussons struggled to generate consistent sales and profit growth. What should have been a dependable consumer staples business instead became a perennial turnaround story.
However, the biggest challenge came from Nigeria, historically the group’s most important market. A series of sharp devaluations in the Nigerian naira severely impacted reported earnings and created huge uncertainty for investors.
Even when underlying trading held up reasonably well, currency movements often overwhelmed any operational progress elsewhere in the business.
As a result, confidence in management’s turnaround efforts evaporated and the shares steadily drifted lower, eventually hitting all-time lows last year.
Reasons for optimism
While investors have good reason to remain cautious, there are signs that the business is becoming financially stronger.
Most notable is the dramatic improvement in the balance sheet. Net debt is expected to fall to less than £30m by the end of FY26, a reduction of more than £80m compared to the previous year. That gives management greater flexibility to invest in its brands and support future growth initiatives.
The latest update also showed that progress is not being driven by a single market. Revenue growth was recorded across each of the group’s four lead markets, helping deliver overall like-for-like revenue growth of around 6%.
Importantly, this suggests the investment case is no longer solely dependent on one region or one product category. Its core brands retain strong positions within their respective markets, providing a platform from which the company can rebuild.
For a business that has spent years on the back foot, broad-based growth and a much stronger balance sheet represent encouraging steps in the right direction.
Bottom line
I first became interested in PZ Cussons in 2024, believing the market may have become overly pessimistic. In hindsight, the challenges facing the business proved even greater than many investors anticipated.
That experience is a reminder that turnaround investments rarely follow a straight path. For that reason, I don’t view the stock as one for novice investors.
However, with the balance sheet improving and signs that trading is stabilising, it could be worth a closer look for those comfortable with a higher degree of risk.
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Andrew Mackie owns shares in PZ Cussons.
