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FTN Cocoa: Struggling to stay sweet

FTN Cocoa: Struggling to stay sweet

FTN Cocoa is among the four surviving cocoa processors in Nigeria after 16 closed offices in 2018.

Ten years down the line, the Nigeria-based agro-allied company has struggled to grow its bottom line, according to findings by BusinessDay.

The company saw its revenue drop to zero in the nine months of 2023, compared to the N17.78 million it earned in the same period of 2022, marking a 100 percent decline.

According to the company’s financial statement, the company did not generate any revenue from local sales or exports in the nine months of 2023.

“The company has not been producing due to the lingering working capital inadequacy. This impacted the gross margin as a result of huge fixed costs that have to be borne,” the company stated in its financial statement.

Read also: FTN Cocoa Processors Plc records first revenue decline in 10yrs

This decline in revenue raised questions about the company’s future, given that it has a convertible bond of JPY 500 million (approximately N1.7 billion) that is due to be repaid in 2026.

The bond has a 4.375 percent yield to maturity. The convertible bond of JPY 500 million has been converted into Naira at the ruling exchange rate of N3.404/1yen on 31 December 2022.

The proceeds from the bond issue received in 2009 were used for the initial expansion of the company. The bond is a direct, unsubordinated and unsecured obligation of the company.

However, it was noted that the bond has the option to be converted into ordinary shares at a floor rate of N0.50 per share.

Read also: FTN Cocoa Processors shareholders authorize N1.4bn capital raise

The company’s main activities involve processing cocoa beans and palm kernels into various products such as Cocoa Cake, Liquor, Butter, Powder, Palm Kernel Oil, and Palm Kernel cake. It exports cocoa cake, liquor, and butter.

The company experienced an exchange gain of N1.77 million in the reviewed period, compared to no gain in the same period of 2022.

Operating expenses recorded a decline to N80.49 million in the period under review from N98.81 million recorded in the same period of 2022.

In terms of finance, there was no income generated in the nine-month period of 2023, compared to N7.03 million in the same quarter of 2022. However, the company incurred a finance cost of N 105.79 million due to accumulated interest on borrowings.

Borrowings amounted to N76.59 million as a result of a short-term loan facility from Zedcrest Capital Limited to meet some urgent working capital needs of the company.

Read also: FTN Cocoa to seek shareholders’ approval for N1.4bn capital raise

By the end of the period under review, the company incurred a loss in profit amounting to N331.74 million in the period under review, an increase from the N289.73 million loss recorded in the same quarter of 2022.

Notably, no income tax was recorded.

The loss per share for the nine months of 2023 was 8.5 kobo, compared to a loss of 7 kobo per share in the same period of 2022.

Net operating activities amounted to N262.74 million, net cash used in investing activities amounted to N234.67 million and net cash generated from financing activities amounted to N1.17 billion.

Cash and cash equivalents at the end of the period amounted to N676.98 million.