Nigeria Cocoa processors groan under huge debts

Data gathered by BusinessDay suggests that Nigeria’s Cocoa processor companies are paying the price for their un-serviced loans and high input costs, with cost eroding sales.

Many of them are burdened with un-serviced debts estimated collectively at about N40 billion ($241 million),” said Akin Olusuyi, managing director of

Ile-Oluji Cocoa Products Limited and vice president Cocoa Prosessors Association of Nigeria ( COPAN). “This may also prevent new credit lines from banks,” Olusuyi added.

The data shows that two quoted Cocoa processor companies, Multi Trex Integrated Plc and FTN Cocoa Processor Plc, recorded a 54.31 percent fall in revenue to N1.59 billion in 2014 from N3.48 billion the preceding year.

The two firms also had costs eroding sales as their cumulative cost of sales margin, which measures the relationship between cost of production and sales increased to 167.12 percent from 92.24 percent last year.

Meanwhile, the costs of exporting their products to Europe have gone up by 30 percent. Industry players say this culminated in loss of direct revenue to the local processing industry.

Analysts agree the huge costs and debt in the capital structure of these companies is crimping their operations.

The high input costs and the debt burden that resulted in increased interest  payment from earnings culminated in a combined loss after tax of N3.41 billion, from N1.57 billion last year.

Multi Trex business was severely hampered by its inability to access working capital as a result of the Central Bank of Nigeria (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 50,000 metric tons of Cocoa beans seed annually,” 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,” said the directors report.

Apart from having to export at a disadvantage, analysts say the market for the products also took a toll on the bottom line performance of firms.

“One of the challenges in the industry is the market. Cocoa products are traded on a commodity exchange, and they follow market forces,” said Akin Laoye, executive director of FTN Cocoa Processing Plc.

Nigeria is the world’s fourth-biggest producer of cocoa, after Ivory Coast, Ghana and Indonesia. Nigeria produced 350,000 tons of cocoa in the 2013-2014 seasons, according to the Agriculture Ministry. Cocoa rose 0.1 percent to $3,005 per ton as of Thursday, January 8. in London.

“To be honest with you, the Nigerian banks are not very supportive to agriculture,” said Laoye.

BALA AUGIE