Exchange problem hits Paterson: Difficulty in obtaining dollars for Nigerian subsidiaries brings profits warning

PATERSON ZOCHONIS, the toiletries and detergents group, saw its share price fall by 10 per cent yesterday after it issued a profits warning caused by foreign exchange problems in Nigeria.

The shares fell 51p to 438p as the group, best-known for its Cussons range, said pre-tax profits for the half-year to 30 November could be 15 to 20 per cent lower than the pounds 13.6m figure struck last time.

Alan Whittaker, finance director, said the problems in Nigeria, which accounts for around 30 per cent of Paterson's business, were rooted in a change in the way US dollars were issued by Nigeria's central bank.

Before last January, Paterson's Nigerian subsidiaries - which, along with other companies, needed dollars to import certain raw materials - used two markets to obtain the currency. Both were run by the central bank, one at the official rate of exchange and the other at a premium rate, which Paterson used to make up the balance required.

However, Mr Whittaker said a log-jam was created in January when the Nigerian authorities decided all bids for currency must go through the official market.

'The problem for the past six months has been getting dollars through the system,' he said. 'There is now a demand far in excess of supply. Nobody gets an amount that satisfies them.'

Typically, a bid for dollars 1m was receiving dollars 50,000.

Paterson did not wish to play down the size of the problem facing it. 'The situation is serious,' Mr Whittaker said.' I don't think it's been more difficult.'

It is understood the company hopes the Nigerian government will revert to the two-tier method of filtering dollar transactions in its next budget, expected in December or January.

Paterson also announced yesterday that taxable profits in the year to 31 May rose to pounds 28.1m against pounds 25.3m last time. A final dividend of 11.4p makes a total of 13.85p, up from 12.6p.

The company said operations in Nigeria were also hamstrung by industrial unrest, power failures and fuel shortages. Elsewhere in Africa, profits advanced in Kenya and Ghana.

Turnover and profits of Cussons UK showed satisfactory increases, aided by higher export sales. Profits also recovered in Greece following last year's setback as the previous oversupply of olive oil was taken up. Plans for a second factory outside Athens are being considered. The operations in Poland and Thailand also advanced.

Profits from associate companies rose to pounds 4.7m ( pounds 3.1m).