Costly financing cuts Kuapa Kokoo’s profit

Kuapa Kokoo Limited (KKL), the licenced cocoa buyer owned by farmers of the crop, says costly bank credit is threatening its profits after its net earnings declined to GH¢203,561 for the 2012/2013 crop season.

The company recorded a profit before finance cost of GH¢6,843,434 in the period, but finance costs of GH?6,570,108 reduced its net profit from a year earlier.

Kuapa Kooko, just like most licenced buying companies (LBCs), borrows from commercial banks which charge between 27-30 percent interest rates -- a situation that is beginning to have a telling effect on the company’s operations.

Speaking at its 20th Annual Delegates Conference under the theme “Celebrating 20 Years of Empowering Small-Holder Cocoa Farmers”, the company’s Managing Director Emmanuel K. Arthur said the high interest paid to banks could have been spent on cocoa farmers to improve their livelihoods.

According to him, the seed-fund advanced to LBCs for purchase of cocoa by Cocobod is inadequate, a situation that must be rectified in time for the new crop season commencing in October.

Congestion at takeover centres, which culminates in defects in cocoa beans, is part of other challenges constraining work of the industry’s operators, he added.

Cocobod, Mr. Arthur said, has the mandate to resolve the perennial problems at the takeover centres to ensure smooth operations during the coming season. He also called for an increase in the producer price of cocoa of GH¢3,392 to curb smuggling of the beans to neighbouring countries where a higher price exists.

The margin paid to LBCs, GH¢342, has remained unchanged over the past four years and the MD wants the figure to be revised to reflect current economic conditions.

During the period under review, Kuapa Kokoo said it purchased 771,937 bags of cocoa estimated to be 48,246 metric tonnes or 5.7 percent of the market share.

Sophie Tranchell, Managing Director of Divine Chocolate, UK, said the success story of Kuapa Kokoo, from its humble beginnings in 1993, is a vindication of the vision that, given a fairer opportunity, smallholder farmers can direct and improve their own lives and communities and be stewards of a sustainable cocoa farming business.