FTN Cocoa losses pile on weak Naira

FTN Cocoa processors Plc’s losses have swollen on the back of a weak naira that boosts cocoa prices and makes it difficult for the firm to buy the chocolate ingredient.

For the first three months through March 2017, the Nigerian Cocoa grinder reaped a loss after tax of N102.88 million as against N62.57 million the previous year.

The loss was due to a 99.23 percent drop in sales to N3.30 million in the period under review as a weak currency hindered the firm from importing pesticides, machines and powder for the purposes of bolstering profit.

Operations at the firm’s Lagos plant has been falling, raising concerns about its future cash flows.

The adoption of a flexible exchange rate by the central bank in June last year after jettisoning the 16 months currency peg saw the naira lose 40 percent of its value against the United States dollar.

Local processors had to buy cocoa from growers at the N460 black market, 50 percent higher than the N305 official rate. A combination of lower oil price and severe dollar shortage tipped the country into its first recession in 25 years.

FTN Cocoa processors has huge debt in its capital structure as debt to equity (D/E) ratio stood at 288.63 percent in March 2017, higher than 269.74 percent the previous year.

A further weakness in the currency could balloon the dollar-denominated debt in the capital structure.  FTN Cocoa has applied for a N1.5 billion export facility from banks to enable it buy more machines and equipment it need to execute its expansion plans.

Nigeria is the sixth largest producer of the commodity with 200,000 metric tonnes of cocoa beans. This compares with Cote de’Ivoire’s 1.58 million metric tonnes, Ghana’s 778,000 metric tonnes, Indonesia’s 320,000 metric tonnes, Ecuador’s 232 metric tonnes, and Cameroon’s 211 metric tonnes of cocoa beans.

The global market is unfriendly as Cote de’Ivoire, the largest producer of the commodity, is grappling with a fall in cocoa prices.

Cocoa futures were little changed at 1547 pounds a metric ton in London on Friday; futures have dropped about 30 percent from a six-year high in July.

Further analysis of FTN Cocoa’s financial statement showed total borrowings reduced by 2.18 percent to N3.14 billion while total assets stood at N5.12 billion as at March 2017.

Experts believe the new central bank window and a rebound in oil price and output could ease the pains of FTN Cocoa as the Central Bank has increased dollar sales to businesses.

The processor’s share price closed at N0.50 on the floor of The Nigerian Stock Exchange on Monday, valuing the company at N1.10 billion.

BALA AUGIE