FTN Cocoa Processors PLC:
A presentation of FACTS Behind Restructuring at the Nigerian
Stock Exchange
Our Agenda for today
• Introduction – Humble beginning to Plc Status
• Tracking Growth trajectory
• Expansion project
• Financial excerpts
• Current status
• Future outlook
• Questions and answers
History/Growth trajectory –Important milestones
• Started operations as 3rd party processors in 1994 with Stanmark Cocoa Ondo; Coop Cocoa, Akure; Cocoa Industries Limited, Lagos; and Cocoa Products, Ile Oluji, Ondo State.
• Own processing factory started operations in March 2007 with a 10000 ton capacity
• Over time developed quality indigenous clients like Nestle and Promasidor (producer of cowbell product)
• Capacity expanded to 20,000 tons in 2011 based on feedback from foreign buyers
• Entered into a strategic partnership with Transmar Commodity Group LLC in 2013. Details to come later
History/Growth trajectory – Important
milestones
Conceptualisation
1994
Private limited liability
2007
Public limited liability
2008
Strategic partnership with Transmar in 2013
Why Expand? 3 core reasonsA
Pro
mis
eM
ade • To
shareholders and debt holders that we will create value through:
• Expansion
Att
ain
ing
Cri
tica
l M
ass • Now 20000 metric
tons installed. Advantages includes
• Visibility
• Economies of scale
• Bigger and better clients with better terms of engagement
• Become industry leader
Fav
ou
rab
leA
gri
c P
oli
cies • EEG – 30% of
export proceeds refunded
• Tax incentive through Pioneer status
• Commercial Agric Credit Scheme (CACS)
The expansion faced new challenges
• Global recession
• Currency fluctuation
• Working capital needs
Coping with the challenges
• Off-take agreement with Transmar Commodities Group LLC – explained in a later slide
• Maintaining our work force. Despite the challenges we managed to retain our best hands
• We continued to engage all stakeholders including regulatory and statutory agencies on our activities; that is part of the reason we are here today
• We have been updating our exceptional shareholders with our progress at our AGMs
• We maintained a very lean cost structure
Financials
FTN COCOA PROCESSORS PLC
IMMEDIATE PAST FIVE YEAR FINANCIAL SUMMARY
2011 2012 2013 2014 2015 Q1, 2016
N’000 N’000 N’000 N’000 N’000 N’000
Revenue 836,936 278,170 460,634 247,418 1,368,462 341,441
(Loss) / Profit
before taxation (243,808) (404,580) (204,830) (577,204) (201,205) (62,568)
EPS (11.08k) (18.39k) (9.31k) (26.24k) (9.15k) (2.84k)
Non Current Assets
Property, plant and
equipment 3,270,125 3,453,012 3,293,739 3,181,432 3,046,948 2,980,055
Current assets 1,005,824 592,023 848,064 831,899 1,015,417 805,705
Current liabilities (849,035) (1,300,550) (1,972,287) (2,559,621) (2,149,377) (2,079,981)
3,726,898 3,088,864 2,549,725 1,861,802 2,589,123 2,436,799
Non-current
liabilities
Borrowings (1,280,436) (1,046,042) (713,134) (602,415) (1,530,942) (1,441,186)
Total net assets 2,385,679 1,982,039 1,775,809 1,198,604 1,058,181 995,613
Equity
Share capital 1,100,000 1,100,000 1,100,000 1,100,000 1,100,000 1,100,000
Share premium 1,459,282 1,459,282 1,459,282 1,459,282 1,459,282 1,459,282
Revenue reserve (173,603) (578,183) (783,473) (1,360,678) (1,501,100) (1,563,669)
Putting it in perspectivesInstalled Vs Utilised Capacity
0
2000
4000
6000
8000
10000
12000
14000
16000
18000
20000
2012 2013 2014 2015
Installed
Utilised
Only from 2015 did we achieve more than 8%of installed capacity
0.00%
20.00%
40.00%
60.00%
80.00%
100.00%
120.00%
2012 2013 2014 2015 1st Qtr 2016
Installed
Utilised
Due to working capital challenges, processing has been limited to the old processing line of 10000 MTs per annum hence the relative low capacity
utilisation
Gross loss conundrum
• Analyst have been asking how can we justify our going concern basis seeing that we are unable to cover cost of production over the years.
• First, manufacturing accounts are usually not presented separately from the Trading accounts thereby disguising manufacturing profits
• Second, with virtually brand new factory with huge machine outlay, the depreciation figure is huge
• Third, the overhead cost especially energy cost continues to run whether at full or five percent capacity
Summary of current status• Firm order of approximately 31% of installed capacity from local
clients
• Transmar available to off-take up to installed capacity, note that the local client is subsumed under Transmar’s off-take agreement
• Factory is in peak shape with Improved available throughput and enhanced processes thanks to the strong technical support from our strategic partners
• We are perfectly hedged against currency fluctuations
• Existing market for up to installed capacity
• Strong backing – Transmar to own 40% of FTN
• We are in talks with AFREXIM to consolidate existing loans and provide working capital
• We are also discussing with a couple of development banks and local banks for working capital
Brief on Transmar and the off-take agreement
The off-take agreement
• Transmar Commodities Group LLC signed an off-take agreement with FTN Cocoa guaranteeing a market for all FTN products up to installed capacity for the next 5 years and renewable
• In addition, they will provide technical support especially in areas of machines, spare parts and quality control.
• FTN has been looped into the global maintenance and quality control scheme of Transmar
• The agreement allows Transmar to own 40% of FTN shares which is a big plus for the following reasons
– The Transmar brand is a big plus; they have depth and reach and re among the top cocoa traders in the world
– The surviving cocoa processors in Nigeria all have foreign affiliations which helps absorb currency shock as well provide technical support
Samples of our products
COCOA Powder – Usually sold to Indigenous Clients - Nestle, Promasidor
COCOA Butter – Exclusively sold to Transmar
Future outlook
• The next slide will help our understanding a little bit of cocoa economy and demonstrate the inherent transparency therein
• From there we can understand the import of having the needed working capital to operate
Schematics
Cocoa Butter
First line processing yields Liquor of btwn 76.5% to 81% with respect to Light or Main
crop season
Liquor is pressed, yields 100% in Cocoa Butter
and Cocoa Cake
Cake pulverisedinto Cocoa
Powder
Liquor mutually exclusive with (Cocoa Butter and Cake). They are all FX
earners and can be sold to Transmarbased on the Off-take agreement
Cake
Cocoa Liquor
Cocoa Beans
Follows Cash and priced at
Terminal
Mainly sold locally. Nestle is
the biggest consumer and our strategic partner
Cocoa Powder
• As represented on the next slide, we will require at least 6200 metric tons of Cocoa Beans to meet the local purchase orders for 2016
• A MT of cocoa beans goes between N920k to N950k, which translate to approximately N6b
But look at how improved our position will be with the 2016 firmed order of 31% of installed capacity
0%
20%
40%
60%
80%
100%
2016
Installed
Utilised
This excludes other sales to Transmar assuming we have the much needed working capital
Representing the 31% in numbers
Local Powder
Butter Sales
Total
Year N’000 N’000 N’000
2016 1,809,000 4,935,000 6,744,000
It goes without saying that with a Revenue of N6.7b less beans purchase of N6b we will have enough room to return
profit after accounting for other conversion costs and the assured off-take profits from Transmar
Opportunities
• Working capital financing through:
– Development banks – requires local Bank Guarantee
– Our capital structure can conveniently support equity injection and this will be considered at the right time
– Stock financing
• Banks
• High Net Worth Individuals
Questions