New Guinea Islands Produce Agmark (NGIP Agmark) is a diversified agri-business based in PNG and operating plantations, coastal shipping, hardware, machinery, trucking, logistics, stevedoring, retailing, engineering, and property development and investment. Headquartered in Kokopo, East New Britain Province, it was formed due to the amalgamation of two companies, New Guinea Islands Produce Company and Agmark Pacific, which joined in 2005. NGIP Agmark is PNG’s leading cocoa company and its largest cocoa grower, trader and exporter, selling to markets including Asia, Europe and the US.
NGIP Agmark has faced major challenges operationally, with the downturn in the economy closing its hardware business in FY 2015. The company had earlier sight to be a large-scale retail hardware player in the domestic market, but this was not sustainable among strong competition and proliferation of new hardware stores. The closure triggered the write-off of large volumes of excess stock and was the main driver behind the net loss of PGK15.3m ($5.2m) in FY 2015.
The company’s total sales revenue declined 4.4% from PGK244.5m ($83.5m) to PGK234.2m ($80m) in FY 2015 due to a decline in hardware sales and a weaker coffee season in the Highlands. Widespread effects on crops were caused by the drought and the El Niño weather patterns that were experienced throughout FY 2015.
However, there was some positive movement, particularly from its core business of cocoa, which registered revenue growth of 10.9%, driven mainly by price improvements rather than increased volumes as was anticipated. The cocoa division remains a strong driver of NGIP’s cash flows.
In other divisions, machinery also recorded strong revenue growth in FY 2015. Rabtrans, which provides logistics and shipping solutions in PNG and internationally, continued to maintain status quo despite the slowdown.
There are plans for expansion in these divisions in the medium to long term. The underlying trend in this business is growing, and further revenue growth is expected in FY 2016. Net assets decreased by PGK1.98m ($676,000), or 2%, from PGK95.9m ($32.7m) in FY 2014 to PGK94m ($32.1m) in FY 2015. The company has undergone a full revaluation of all its land and building assets in FY 2015, realising a positive adjustment of PGK23m ($7.9m) in land and building values.
NGIP remains committed to reducing its debt level, and the company has moved to alternate financing arrangements with Bank South Pacific. The company has assessed its property portfolio and will undertake divestment opportunities to drive debt reduction. Several divestment programmes are currently under way.
There is potential for recovery in the agriculture sector in the medium term, especially in the country’s cocoa industry. It is estimated that cocoa production volumes will increase in FY 2016 and, coupled with a recovery in international cocoa prices, this should translate into strong cash flows for the company. In addition, the recovery in the agriculture sector more broadly has also seen NGIP convert its hardware shops into “Didiman Stoas” accompanying cocoa buying points and focusing on the needs of cocoa farmers.
The closure of various hardware branches has also led to head office cost-reduction progressively throughout the year. The company aims to continue investing into commercial and residential property development to enhance the returns generated by the property portfolio. With an improved focus and strong emphasis in growing and developing the commodities business of cocoa and coffee, we believe NGIP will make strong gains.
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