CPC buffeted by poor utilities supply

Cocoa Processing Company (CPC) says interruptions in water and electricity supply continue to pose huge challenge to its operations, even leading to a plant shut-down during the 2011/2012 operational year.

“The company is currently working under heavy operational challenges, including interruptions in water and electricity supply and some financial constraints.

“The plants and machinery of the three factories encountered some electrical and mechanical faults, which contributed significantly to production downtime. As a result the company could not achieve the 24,000 metric-tonne target set for 2011/2012,” the company’s Board Chairman, Jacob S. Arthur, said at their annual general meeting held in Accra last week.

He revealed that CPC is currently facing serious cash flow challenges as most banks are unwilling to grant them overdraft facilities, due largely to the company’s indebtedness to the syndicate of cocoa-financing banks, led by Barclays, as well as Ghana Cocoa Board (COCOBOD).

He explained that due to its indebtedness, 85 percent of the company’s export proceeds were used as payment for the outstanding debt to COCBOD, while the remaining 15 percent went to the syndicated banks.

“Despite management’s strenuous efforts to increase production, turnover and margins fell, basically as a result of the massive fall in prices of the company’s semi-finished products on world commodity markets.”

The company reported a loss of US$10.2 million in 2012, after incurring a loss of US$6.8 million in the previous financial year. Its current liabilities exceeded current assets by US$58.1 million, compared to the 2011 figure of US$50.7 million.

Mr. Arthur explained that management has initiated an action plan aimed at increasing the production of confectionery products, which currently provide between 8 and 10 percent of revenue.

“Though confectionery production for the year was 1,013.46 metric tonnes, constituting more than 80 percent of the target for the 2011/2012 financial year, management is determined to step up efforts to encourage consumption of the products within the West African sub-region for profitability.”

In spite of the difficulties, however, the Board Chairman said CPC processed 22,463.48 metric tonnes of raw cocoa beans, the highest production achieved in 10 years, which represents 93.6 percent of the year’s target and a 32.5 percent increase over the previous year’s production.

Though CPC’s installed throughput capacity is 64,500 metric tonnes per annum, currently the company’s actual production hovers between 25 and 30 percent of the capacity, with the highest being 34.8 percent which was achieved last year. Mr. Arthur expressed optimism CPC would overcome its challenges and return to profitability.

Outlining a number of new strategies to resolve some of the challenges, Mr. Arthur announced that a number of boreholes have been sunk to ease the water problems. On regular electricity supply, he said “the installation of a new switchgear and the dedicated power line have also just been completed.”

He said the board has considered the possibility of processing raw cocoa beans or semi-finished products for companies for a fee as a means of effectively utilising the company’s excess plant capacity.

CPC was established in 1965 and is a cocoa buyer and chocolate confectionery maker.