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Thursday, August 18, 2022

FTN Cocoa Needs Capital Injections to Bolster Working Capital as Losses Pile

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FTN Cocoa Processor Plc needs capital injections to restructure its depleted balance-sheet and savage a company that has been recording recurring losses close to a decade from bust.

The company posted a loss after tax of N169.77 million in the first six months of 2022, from a similar loss position recorded in 2021.

It incurred accumulated loss or negative retained earnings of N8.86 million as at June 2022. At that date, it had a negative shareholders‟ fund of N2.13 billion.

It is important to note that the auditors said the above conditions indicates the existence of material uncertainty which may cast doubt on the company’s ability to continue as a going concern if strategies are not put in place to immediately ensure that the earnings capacity of the company improve significantly to cover the operating costs and ensure profitability in the nearest future.

Current liabilities of N879.06 million is 2.22 times current assets, which means the FTN Cocoa is struggling to meet short term obligations such paying suppliers as at when due.

Interestingly, it has more short-term debt than cash, which indicates a looming liquidity crisis as it recorded a cash ratio of 0.045 percent, according to calculations by MoneyCentral.

The cash ratio is a liquidity measure that shows a company’s ability to cover its short-term obligations using only cash and cash equivalents.

A calculation greater than 1 means a company has more cash on hand than current debts, while a calculation less than 1 means a company has more short-term debt than cash.

However, there is light at the end of the tunnel as the board of directors are making concerted efforts to strengthen FTN Cocoa’s working capital and reposition for growth.

Last year, the board  planned to issue 1.7 billion ordinary shares of 50 kobo each at par value of 50 kobo per share to existing shareholders of the company.

The rights issue will be pre-allotted on the basis of 17 new ordinary shares for 22 ordinary shares held as at the close of business on Tuesday, November 09, 2021.

Reuters had reported that the board of the company had also blamed high cost of production and high finance expense for the negative performance noting that inadequate working capital hindered the company from procuring raw materials needed to facilitate optimum production.

Another good tiding is that there is a new investor in the name of O. H origin that has injected a net amount in the sum of N4.69 till date and promise to assist further by providing working capital

Incorporated in 1991, FTN’s principal activities include processing of cocoa beans and palm kernel into cocoa cake, liquor, butter, powder, palm kernel oil and palm kernel cake.

While it exported cocoa cake, liquor and butter, other products including cocoa powder, palm kernel oil and palm kernel cakes are marketed locally to manufacturing companies.

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