PBC Limited, the largest licensed buying company in the country, is considering embarking on a recapitalisation drive to expand the operations of the company.
The move is to help in halting the dwindling financial fortunes of the company largely caused by the unavailability of working capital.
“The Board finds this a most needed action and intends to work diligently towards its attainment,” Maxwell Kojo Atta-Krah, Managing Director of PBC, indicated at the company’s 14th Annual General Meeting in Accra.
Among other options, the recapitalisation drive to raise equity capital is likely to include a Rights Issue or Private Placement of shares to raise about GH¢200million to reduce short term borrowing and finance cost.
“The proposal is still under serious consideration with the major shareholders and it is expected that some grounds will be gained towards it within the year,” he stressed.
The unavailability of working capital from the inception of the company led it to rely heavily on short term borrowings from financial institutions and the Ghana Cocoa Board (COCOBOD) for cocoa purchases, with the associated high cost of finance.
The increasing operating cost, coupled with stagnated revenues from sale of cocoa, has resulted in the Ghana Club 100 company recording losses for two consecutive years, and its consequent inability to declare dividend.
In 2014, net finance cost increased by 18 per cent from GH¢51.9million in 2013 to GH¢61.4million, representing about 55.3 per cent of the company’s gross earnings.
Direct operating cost increased by one per cent over the previous year’s figure from GH¢48.6million to GH¢49.1million, while total operating cost (excluding finance cost) increased by 6.9 per cent from GH¢ 78.8million to Gh¢ 84.3million.
In addition, the turnover for cocoa operations increased marginally from GH¢1.107billion in 2013 to GH¢1.123billion, representing an increase of 1.4 per cent, due to the increase in volume of cocoa purchase and delivered in 2014, while turnover for haulage services decreased by 5.2 per cent from Gh¢15.5million to GH¢14.7million in 2014 due to the decrease in the quantity of cocoa hauled at the secondary level by the company’s trucks.
The company, like other licensed buying companies (LBCs), survives on margins (commission) paid by COCOBOD. Although operating cost continues to increase, the margin has remained at the same level for the past four years, resulting in declining profitability for the LBCs.
In spite of the challenges, the management was confident of bright prospects for the company, especially as it diversifies its operations.
Among its new investments, the company has built a shea factory at Buipe in the Northern Region, and a three-star hotel at Kumasi, with the aim of increasing its revenue streams.
“The company will continue to put in place the needed strategies to improve its operational capacities and efficiency to be able to recycle seed funds as much as possible, increase market share to enhance its revenue and boost its profit levels in the years ahead,” Mr. Atta-Krah promised.
By Edmund Mingle