NIGERIA – FTN Cocoa Processors plc half year (H1) results show the company posting a loss after tax of N252.11 million as it continues to grapple with what could be described as insurmountable costs, analysis of the financial statement shows.
It would be recalled that the cocoa processing company has been recording recurring losses since December last year, a performance that calls for urgent reorganising and cost controls measures.
For the six months through June 2014, the company posted a loss after tax of N252.11 million, while sales surged by 111.44 percent to N159.73 million.
The reasons for the dwindling performance of the company at the bottomline level can be attributable to spiralling input costs, as cost-of-sales margins were as high as 187.31 percent, thus culminating in negative gross profit of N139.47 million.
Additionally, operating expenses were up by 27.55 percent to N116.09 million in HY 2014, as against N91.01 million as of HY 2013, while operating expense margin reduced to 72.97 percent in HY 2014, compared with N120.46 million the preceding year.
Firms operating in Africa most populous and largest economy Nigeria are bedeviled by operating challenges such as epileptic power supply and bad roads that lead to spiking production costs.
Analysts are calling on the management of the company to take a swift decision such as switching to a cheaper source of energy like gas, and an alternative distributed channel they say is more reliable, will reduce cost and maximise profit.
FTN Cocoa’s finance costs were down by 45.25 percent to N31.21 million in HY 2014, from N57.16 million the preceding year, while total borrowing increased by 6.70 percent to N2.24 billion.
Based on BusinessDay’s analysis, the company is highly geared as its debt to equity ratio increased to157.73 percent as against 124.1 percent last year.
In other to bolster its processing capacity, FTN has started a programme called Africa Cocoa Initiative aimed at connecting processors and off-takers in Europe and America.
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 far-fetched if companies like FTN are underachieving.
Nigeria is the fourth largest producer of the chocolate ingredient, after Ivory Coast, Ghana and Indonesia.
Total assets fell by 4.83 percent to N4.33 billion in 2014, as against N4.55 billion in 2013.
The company’s share price closed at N0.50 on the floor of the NSE, while market capitalisation was N1.10 billion.