The Cocoa Processing Company (CPC) Limited has indicated that it would need $3 million in the near future to recapitalize and improve the strength of its balance sheet.
Nana Agyenim Boateng I, Chief Executive Officer (CEO) of the company, made this known yesterday in Accra when his outfit appeared at the Ghana Stock Exchange (GSE) to explain the facts behind its operational figures.
The company since 2010 has not been able to show up at the GSE to explain issues due to a lot of reasons.
Nana Agyenim Boateng explained that “CPC’s current financial liabilities would require some time to improve on the cashflow. Although our consolidated projected income statement shows some positivity after three years, it will take some reasonable time for dividend to be paid to shareholders.”
For instance, its revenue for 2016 reduced by 109 percent due to inadequate supply of raw cocoa beans for processing due to insufficient working capital.
Revenue for 2017 increased by 5.6 percent.
The first quarter of 2018 has shown positive signs of growth in revenue.
The company’s performance since 2014 has been full of exogenous operational challenges, which made the firm to record unimpressive financial results.
“It is sad to note that the company for the last three years has operated very poorly, but gracefully we have been reducing our losses year by year and striving to open a new chapter commencing 2017/2018 financial year. During those years, some occurrences impacted rather negatively on the company’s operational activities and caused a major dip in its performance such as withdrawal of support from the financial institutions/banks and the non-supply of cocoa beans to CPC.”
Contrary to expectations, CPC has been dealing with unfavourable economic, market operational and environmental conditions since it secured loans from a syndication of banks led by Barclays for rehabilitation and expansion works.
It has therefore been recording losses year after year, resulting in serious cash flow crunch.
Also, its inability to pay the loans on schedule has resulted in astronomical increases in its financing costs.
Its outstanding balance with such syndicated banks stand at $20,213,037.
Indebtedness to Cocobod
It would be recalled that COCOBOD, in 2005, converted $15.78 million of its very old debt into equity and then in 2008, a further $32,022 million from the debt was converted into long terms loan at an annual interest rate of 5 percent.
Owing to the situation, CPC was compelled to enter into a three-year tolling arrangement with Messrs Touton SA to process 25,000 beans annually.
This agreement will end in June 2010.
Although CPC has a total capacity of 64,500 metric tonnes for its two cocoa factories, audit machines for the two factories give a performance assessment of between 70 and 80 percent.
“We therefore intend to solicit some working capital to boost our operations and revenue earnings. This will be achieved with the retooling and replacement of some machinery parts to enable us operate at a 74.4 percent capacity i.e. 48,000 metric tonnes,” the CEO added.
This is likely to come from Prudential Bank.
Established in 1963 by the Drevici Group of Companies, CPC’s shareholding now stands at 57 percent for COCOBOD, 23 percent for government and 14 percent for SSNIT, all amounting to 94.14 percent.
By Samuel Boadi