One of Nigeria’s oldest cocoa processing companies, FTN Cocoa Processors Plc incorporated appears headed for bankruptcy, as its liability is said to have exceeded its assets. The company, which was established in 1991 as Fantastic Abiola Nigeria Limited, but was later re-christened Fantastic Traders Nigeria Limited on August 26, 1998.
The company’s core activities are processing cocoa beans and palm kernels into cocoa cake, liquor, butter, palm kernel oil, and palm kernel cake for export and sales to local manufacturing companies.
However, the embattled company has seen its operations dwindle after declaring loss after tax of N10.65bn, N431m and N1.5bn in 2023, 2022 and 2021 respectively. In 2020, the company also declared a net loss of N843.39m. The loss trend has continued with the company declaring a N10,51bn loss after tax by the end of the second quarter of 2024, according to FTN Cocoa’s financial statement for June 2024.
Beyond the losses declared, the company’s books showed that FTN Cocoa’s assets of N13.4bn have fallen far below its liabilities which have surged to N16.4bn as of June 2024. Consequently, the company’s liabilities are N3.5bn above its assets, which is a sign of asset deficiency and an indicator the company may default on its obligations and be headed for bankruptcy, according to Investopedia.
In December 2023, FTN Cocoa had an assets base of N13.25bn while its liabilities were N9.96bn. “A company is bankrupt if it has negative equity or is insolvent. A company has negative equity if it has more than one creditor and the amount of its liabilities exceeds the amount of its assets (it has negative equity),” PricewaterhouseCoopers (PWC) said.
The company also has a debt obligation that is due by 2026. The company said, “FTN Cocoa Processors Plc issued an 18-year JPY 500 million 0 per cent coupon Bond in 2008 due in 2026 to Daewoo Securities (Europe) without any option to convert the bond into ordinary shares of FTN Cocoa Processors Plc at maturity. The proceed from the bond issue received in 2009 was used for the initial expansion of the Company.
“The bond is a direct, unsubordinated and unsecured obligation of the Company. The bond has a 4.375 per cent yield to maturity.
“The deep discount bond of JPY 500 million has been booked rightly in the original currency before conversion into Naira at the ruling exchange rate of N9.1704/1yen on 30 June 2024. It is expected to be partly or fully repaid in 2026.”
