PBC Limited strategizes to accrue profits

Management of Produce Buying Company (PBC) Limited, on Wednesday outlined a number of strategies to be adopted to put the Company on the path of sustained growth and profitability in the coming years.

These include vigorously pursuing the agreed 70:30 per cents ratio where the Ghana Cocoa Board (COCOBOD) provided the 70 per cent seed funds and credited funds whiles other financial institutions supplied the rest for cocoa purchasing.

Others included asking shareholders to raise working capital for the company to operate.

This was made known by Mr Joseph Osei Manu, Deputy Managing Director in charge of Finance and Administration at the PBC Limited, when the Company took its turn at the facts behind the figures at the Ghana Stock Exchange in Accra.

He said “In the 2011/2012 Main Crop season, a total of GH¢402 million was sourced as credited funds from some financial institutions as against a total amount of GH¢369 million obtained from COCOBOD”, adding that the situation defeated the 70/30 combination arrangements and tendered to expose the company to high interest rate charges.

PBC Limited experienced reduced growth in volume of cocoa purchases and total revenue and operating profit during the 2011/ 12 financial year.

Net profit before tax reduced by 63 per cent from GH¢37.434 million to GH¢13.725 million.

Mr Manu said the company had to contend with higher than expected finance costs which were attributable to the rather volatile finance environment in which the company operated during the year under review.

He said turnover for cocoa operations decreased from GH¢1.285 billion to GH¢1.147 billion, a decrease of 10.7 per cent due to the decrease in the volume of cocoa purchased and delivered.

Mr Manu said “with a reduction of 13 per cent in national cocoa purchases from 1,011,880 tonnes in 2010/11 to 879,240 tonnes in 2011/12 due mainly to unfavourable weather conditions the Company’s purchases similarly reduced by 17 per cent from 374,858 tonnes in 2010/11 to 312,312 tonnes”.

He added that this level of purchases culminated in a market share of 35.5 per cent as against the 37 per cent recorded in the previous year.

Mr Manu said the company’s net financing cost increased by 36.5 per cent from GH¢34.563 million to GH¢47.174 million attributed mainly to the Company’s reliance on overdrafts and other short term loans to augment funds for cocoa purchase.

“The relatively high cost associated with such borrowing in the regime of increased interest rates contributed to the high finance cost”, he added.

Mr Manu noted that perennial port congestion and the inability of the company to deliver cocoa faster at the takeover centre, contributed towards depriving the company of access to recycle funds from COCOBOD, thereby increasing finance charges on the Board’s funds.

He said though during the 2012 light crop season the Company purchased 29,611 tonnes of cocoa valued at GH¢99 million, it received GH¢21 million as funding from COCOBOD.

“The remaining GH¢78 million was sourced from financial institutions at an interest rate of 23 per cent as against the rate of 12 per cent at which COCOBOD was expected to fund the operations.”

Mr Manu stressed that the inadequacies of COCOBOD to fully fund its portion of the company’s operations over the years has greatly contributed to the company’s over reliance on overdrafts and short term loans with the resultant high financial cost to the Company.

Mr Kojo Atta-Krah, Managing Director of PBC Limited, said “as we continue to study the business environment and develop relevant capacity to enable us exploit opportunities that emerge, we shall create the incremental value on the company, to ultimately establish PBC as the blue-chip on the market.”