PBC debt burden to impede share performance

On the Ghana Stock Exchange

Produce Buying Company (PBC) reported improvement in total revenue from its cocoa buying business for the HY-2017 period despite the huge debt levels on the company’s books of accounts. Revenue increased by 26.81%; from GHS 1,811,639,602 in HY-2016 to GHS 2,297,302,691.

 

Operating profit went up by 32.05% over the six months period, however; high cost of sales and increased direct operating expenses continues to over-burden the books of PBC. Operational inefficiencies arising from high cost of debt has put immense pressure on the profitability of PBC in recent years. Indeed, poor performance has led to failure of management in paying dividends to shareholders for the 2016FY period. Cost of sales jumped up by 27.93% as cost of cocoa buying and transportation of agro-products remains on the rise. Direct operating expenses rose marginally by 7.40% to close the HY-2017 period at GHS 63,780,939.

 

Finance expenses for the period under review increased to GHS 108,369,560 from GHS 79,688,405 in HY-2016; this represents a rise in cost of borrowing by 35.99% for the six months period. PBC impaired ability to pay loans from financial institutions on time as a result of government interference and constrain has contributed to the increment in impaired loans of banks.

 

Even though Profit after Tax rose by 12.05%; from GHS 11,780,215 in HY-2016 to GHS13,200,199 in HY-2017; the company continues to exhibit operational inefficiencies as a result of high debt burden. GN Analysts recommend a HOLD on PBC shares. The status of the equity is UNSTABLE and therefore its high leverage ratios could easily translate to dips in share price within the short term period.

 

Trading activity on the bourse ended with 4 gainers (BOPP, EGL, FML and HFC) and 3 losers (GOIL, SCB and SOGEGH) yesterday. CAL topped the trading chart in terms of volume as 1,001,000 shares worth GHS 1,001,800.00 changed hands. Returns on the Composite and Financial Stock Index pegged at 39.26% and 40.89% respectively.

 

On the Ghana Alternative Market (GAX)

Trading activity on the Alternative Market was hushed as no shares changed hands on the GAX.

HORDS currently lead record capital gains on the GAX, appreciating by 25% from 2016 year open.

 

On the Currency market

The Cedi LOST marginally to all the major trading currencies on the inter-bank market yesterday. The local currency exchanged at a mid-rate of GHS 4.3990 to the USD, GHS 5.6879 to the GBP and GHS 5.2849 to the EURO.

 

The GCFM Cedi index, a measure of the holistic performance of the Cedi on the inter-bank market now records a year-to-date depreciation of 9.74%.

 

By GN Research

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