A listed cocoa processor struggling with capital for its day-to-day operations has turned to financiers outside Nigeria to post its first revenue growth in four years after local bank loans proved too expensive and rigid, the company said.
FTN Cocoa Processors, a notable processor, and exporter of cocoa commodities made about N602 million in 2018, its latest annual financial result shows. This is 636 percent more than it made in the prior year, halting a decline in sales since 2015.
“Because we are basically into exports, we are talking to financiers outside Nigeria and that accounted for the little turnover we did,” Akinrinola Laoye, an Executive Director at FTN Cocoa Processors told BusinessDay over the phone. “With working capital, we can boost revenue to N10bn-N12bn annually.”
Laoye said the company has “done some little contracts” with the financiers which want to test the waters before a fuller commitment.
The foreign financiers were not named nor the amount under consideration.
FTN Cocoa ran into difficulties when one of its foreign partners, Transmor Commodity USA, went into liquidation in 2017, affecting FTN’s ability to fund its day-to-day operations.
The cocoa processor had in 2015, signed an off-take agreement with the US company but with the deal gone bad, the company turned to local lenders to finance its operations.
However, FTN recently ended up having its head office taken over by a local bank it owed, forcing it to operate from a rented apartment and reconsider its financing strategy.
“The company has been having issues borrowing locally because the cost of local money is high,” FTN told BusinessDay.
While the Exports Stimulation Facility, an intervention fund, has been difficult for FTN to obtain due to a bank guarantee requirement, the company will steer clear of local bank loans because of the unavailability of power which increases its cost while the country’s port situation means longer time to convert goods to cash, a situation banks do not consider when asking for loan repayment, FTN said.
“For that reason, getting money at double digit-more than 20 percent doesn’t make sense and we do not want to go back to where we are coming from,” Laoye said. “We do not longer owe any Nigeria bank.”
The company’s result stated it has discharged the United Bank for Africa loan obligation and paid Union Bank loan.
FTN said it sustained a gross loss of N284 million compared to a gross loss of N251 million in preceding year.
However, the Board mentioned that the core investor that assisted in liquidation of bank loan will be providing working capital in due course and company will be able to procure raw materials and produce at optimum level.
The company has a short term loan facility from Zedcrest Capital Limited and Swiss Finance Solution Limited to meet some of its urgent working capital needs.
Despite the rebound in revenue, the cocoa processor noted a high cost of production which resulted in continued gross and net loss in 2018.
