Multi-Trex inability to access working capital dents growth prospects

The inability of Multi-Trex Integrated Foods plc to have access to working capital, to expand its operations, has dented the company’s growth prospects and also hindered the processor of the cocoa from tapping into Nigeria robust economy.

The audited financial statement of Multi-Trex as posted on the floor of the Nigerian Stock Exchange (NSE) showed the company posting a loss after tax of N3.02 billion from the same loss position  of N1.24 billion the same period of the corresponding year 2013, while sales fell by 56.48 percent to N1.43 billion.

The company’s business was severely hampered by its inability to access working capital as a result of the CBN directive that soon after the loan restructuring, prohibited all deposit money banks (DMBs) from extending new credit facilities to all companies that own debt of N5 billion or above to the Assets Management Corporation of Nigeria (AMCON), according to the reports of directors of the company.

Skye Bank plc had sold the company’s N8.5 billion loans to the corporation.
”The corporation did not consent to the company’s request for working capital critically needed to employ reasonable capacity of the company’s newly acquired state-of-the-art cocoa processing plant that is capable of processing up to 50000 metic tons of cocoa beans,” according to the directors’ report.

“Essentially, the delay in accessing working capital accounted mainly for the abysmally low capacity utilisation level attained during the year,” the report stated.
Based on BusinessDay analysis, cost of sales margin, which measures the relationship between sales and cost of sales, jumped to 160.84 percent in year-end April 2013, from 89.76 percent in 2012, which analysts also attribute to one of the reasons behind the company’s slow growth at the bottom-line level.

Additionally, the high cost margins swallowed sales, which culminated in a gross loss of N874.01 million in the period under review as against N331 million favourable positions in 2012. It also means that the company is unable to control direct costs attributable to projects.

Also, denting profits is a 95.89 percent increase in interest expense to N1.43 billion in 2014, from N730.07 million last year.
Gearing ratio, which measures the proportion of debt in the capital structure of a firm, spiked to 341.61 percent in 2014, from 176.65 percent the preceding year, which means the large chunk of the company’s balance sheet is financed by lenders.

Further analysis of the balance sheet shows recurring losses made total equity drop by 48.31 to N3.22 billion compared with N6.23 billion the preceding year.
Cocoa is a product that is traded in the commodity market and can be a major source of foreign exchange earning to the Federal Government, but this could be farfetched if companies like Multi-Trex Foods are struggling.

Nigeria is the fourth-largest producer of the chocolate ingredient, after the Ivory Coast, Ghana and Indonesia.
The company’s share price closed at N0.50 on the floor of the NSE, while market capitalisation was N1.86 billion.

BALA AUGIE