Ghana’s PBC Limited struggles with high costs of finance

The PBC Limited will pursue needed strategies to improve upon its operational capacities and efficiency to maintain sustained growth, but it is wary of high finance costs that have ragged the company over the years.

PBC, the country’s largest buyer of cocoa beans, achieved a fairly poor performance in 2011/12 financial year as compared to the previous year due to unfavourable weather conditions that impacted negatively on Ghana’s cocoa production.

According to the company, it had to contend with higher than expected finance costs attributable to a volatile finance environment.

“This resulted in the company being faced with unexpected high costs from loans and overdrafts for cocoa purchases, while the margin per tonne paid by the Regulator for cocoa delivered has remained fixed for the last three years,” Joseph Osei Manu, Deputy Managing Director for Finance and Administration told reporters and stock analysts in Accra.

“It is the resolve of the Board and Management to adopt the needed measures to continue to search for financing options that will be more favourable to our operations, with the aim of cutting down cost drastically and increasing revenue and growing profits for higher return on shareholder’s investments in the years ahead,” he said.

Unhappy with COCOBOD

The lack of commitments from the Ghana Cocoa Board to solve challenges in the industry is also hampering its growth.

Osei Manu explained that the inability of the company to deliver cocoa faster at the Take-Over-Centre deprived the company access to recycle funds from the Ghana Cocoa Board thereby increasing finance charges on Cocobod funds.

“Sometimes the company also found it difficult to get paid up timely by the Ghana Cocoa Board for cocoa delivered,” he said.

During the 2011/2012 main crop season, the company sourced GH¢402 million as credited funds from some financial institutions as against GH¢369 million obtained from Cocobod.

“This clearly defeated the 70/30% combination arrangements and tendered to expose the company to high interest charges,” he added.

Osei Manu said the inadequacy of Cocobod to fully fund its portion of the company’s operations over the years has greatly contributed to the company’s over reliance on overdrafts and short-term loans, the end results being the unavoidable high finance cost.

Profits down

The company recorded a gross profit of GH¢118.187 million as compared to last year’s GH¢134.803 million, a decrease of 12.3 per cent.

Turnover for cocoa operations also decreased from GH¢1.285 billion to GH¢1.147 billion, a decrease of 10.7 per cent due to the decrease in the volume of cocoa purchased and delivered.

With a reduction of 13 per cent in national cocoa purchases from 1,011,880 tonnes in 2010/11 to 879,240 tonnes in 2011/12 due mainly to unfavourable weather conditions the company’s purchases similarly reduced by 17 per cent from 374,858 tonnes in 2010/11 to 312,312 tonnes. The company’s market share also reduced from 37 per cent to 35.5 per cent.

Shea factory halted

The company’s US$10 million plant at Buipe, 110 kilometres (68 miles) from the Northern region capital, Tamale, with a capacity of 40,000 metric tonnes has been halted.

“During trial runs however, the plant was found to be operating below the capacity envisaged. Operations have therefore been halted temporarily to enable the suppliers of the plant rectify the defect. We trust that this will be completed soonest to enable full operations at the factory,” said the Managing Director, Kojo Atta-Krah.

By Michael Sarpong Bruce