Business News of 2014-03-18

PBC seeks private funding as its fortunes dwindle

PBC Limited, the country’s largest purchaser of cocoa, is now turning to a private source for funds to revive the dwindling financial fortunes of the company.

The company is targetting the cedi equivalent of US$75 million from the private source which, according to the Managing Director of the company, Mr Kojo Atta- Krah, is prepared to offer the needed funds under what he described as ‘very friendly terms’.

Mr Atta-Krah disclosed this when the company took its turn at the ‘Facts Behind The Figures’ session under the auspices of the Ghana Stock Exchange in Accra. In attendance were financial analysts, brokers and the media.

Although he did not disclose the source the company was targetting, he said the funding would be “a revolving credit that would be granted at the beginning of each cocoa season and retired at the end of the season. With this achieved, the greatest ill confronting the company would have been eliminated.”

According to him, the company is overly dependent on loans, an arrangement that is not financially prudent; hence the need for a permanent source of capital to get operations running to churn out expected results.

He said the interest on the privately sourced funds would be less than a quarter of the interest rates the commercial banks were currently lending to the company (between 22 to 25 per cent).

Currently, the financial position of the company leaves much to be desired, with it making a loss of GH¢8.8 million for 2013.

“Finance cost has increased six-fold over the last five years, recording an unprecedented high of GH¢52 million in 2013,” Mr Atta-Krah said.

Coupled with the huge finance cost was also the fact that buyers margin paid for cocoa purchased and delivered has remained static since the 2010/2011 cocoa season, despite increasing cost of tools, labour and on haulage of cocoa, having a toll on the company’s finances.

The dipping of the company’s finances has naturally created a downward valuation of the company’s stocks on the market, causing it to tumble from the high point of GH¢0.26 in March 2013 to the current GH¢0.17

2013 Performance review

The Deputy Managing Director in charge of the company, Mr Joseph Osei Manu, said turnover for cocoa operations decreased marginally from GH¢1.147 billion to GH¢1.107 billion, representing a decrease of 3.4 per cent.

“With a reduction of 4.97 per cent in national cocoa purchases from 879,240 tonnes in 2011/12 to 835,466 in 2012/13 due mainly to unfavourable weather conditions, the company’s purchases similarly reduced by 5.46 per cent from 312,312 tonnes to 295,252 tonnes in the years under review.

Again, turnover for the haulage services decreased marginally from GH¢15.657 million to GH¢15.523 million.

This is a decrease of 0.85 per cent due to the slight decrease in the quantity of cocoa hauled at the secondary level.

“Total expenses (excluding financing cost) increased by 12 per cent from GH¢70.237 million to GH¢78.807 million,” Mr Manu said.

2014 Outlook

Mr Manu explained that efforts were being made to get the Akuafo Cheque mode of purchasing cocoa reintroduced to eliminate the huge risk and its accompanying losses associated with the current cash-based system.

The company, he also said, would continue to put in place measures to monitor and effectively manage the various investment projects being undertaken to ensure maximum returns.