PBC Ghana Shuns Banks to Turn to Cocoa Board for Cash

PBC Ltd., the biggest buyer of cocoa beans from farmers in Ghana, will borrow 20 percent more than it planned from Ghana Cocoa Board as it tries to reduce finance costs that cut profit last year.

The company formerly known as Produce Buying Co. will borrow 540 million cedis ($284 million) from the board to purchase beans in the main- and light-crop seasons, Joseph Osei Manu, deputy managing director in charge of finance and administration, said in an interview in Accra on Jan. 11. PBC said in September it planned to borrow 450 million cedis from the industry regulator.

“The lending from the cocoa board is cheaper than bank loans,” Manu said. “There is no risk of exchange-rate loss as is the case with international bank loans.”

PBC’s net income declined 64 percent to 10.1 million cedis in the fiscal year that ended in September after bean purchases fell 17 percent to 312,312 metric tons from a year earlier. Finance costs rose 36 percent because of higher lending rates and exchange-rate losses, Manu said.

Bank borrowing may cost as much as 29 percent annually, Xorlali Torsu, a stock trader at Accra-based Databank Financial Services Ltd., said by phone. “If the company reduces finance expenses and it is not even able to buy a lot of the beans this year, profit can grow.” The board charges less than 20 percent, Manu said today.

Syndicated Loan

The company canceled earlier plans to borrow 200 million cedis from banks to supplement its financing from Cocobod, as the regulator is called, he said. PBC will opt instead to take as much as 100 million cedis in overdraft lending if needed, according to Manu.

Cocobod raises money through syndicated loans for buyers to finance crop purchases. PBC expects to buy 315,200 tons in the current 2012-13 crop season, which started in October. That would be about 37 percent of the national output, Manu said.

“This year we expect the harvest to be spread quite evenly over the period,” he said. “Last year they came in bulk at the start of the season but by January we were getting almost nothing.”

PBC shares on the Ghana Stock Exchange were unchanged at 18 pesewas by 1:22 p.m. in Accra.

To contact reporter on this story: Moses Mozart Dzawu in Accra at +233-302-258-797 or mdzawu@bloomberg.net.

Before it's here, it's on the Bloomberg Terminal.