NGIP Agmark: Agro-industry

The Company

New Guinea Islands Produce Agmark (NGIP Agmark) is a diversified agri-business based in Papua New Guinea and operating plantations, coastal shipping, hardware, machinery, trucking and agricultural supply businesses. NGIP Agmark is PNG’s leading cocoa company, as the country’s largest cocoa grower, trader and exporter. It is headquartered in Kokopo, East New Britain Province.

From this base the company trades more than 60% of PNG’s cocoa into Asia, China, the US and Europe, shipping directly to the world’s largest chocolate manufacturers. The company is also involved in the marketing and trading of a range of other agricultural commodities including vanilla, copra, essential oils, chillies, pepper and other spices.

NGIP Agmark’s footprint includes plantations in East New Britain Province, cocoa buying points across the PNG islands and mainland, hardware and agricultural supply retail outlets at over 10 locations, costal shipping based out of Rabaul, land transport in East New Britain and Morobe Province, and engineering fabrication in Kokopo.

NGIP Agmark also has a growing portfolio of property and share investments across PNG.

NGIP posted a net profit after tax of PGK1.84m ($696,256) in 2013 compared to a net loss of PGK5.64m ($2.1m) in 2012.

Sales revenue increased 25% from PGK194.65m ($73.7m) in 2012 to PGK243.4m ($92.1m) in 2013. This was attributed to strong contributions from its engineering and steel fabrication division and its transport and shipping division.

The property division saw modest rental income in 2013. The company realised a profit of PGK4m ($1.5m) in its main property in Lae.

The funds were also re-invested into new property opportunities which have excellent potential for development and capital growth.

The company has also finalised plans for development of its 19,000 sq metres of commercial land in Lae. This move will see coffee, cocoa, machinery and some hardware activities relocated to this site towards the end of 2015.

In addition, NGIP Agmark’s coffee division also saw moderate growth in revenue, albeit posting another loss. This was related to the need to recognise in the books a full provision for old debts accumulated through advances supplied to coffee grower groups under previous ownership. This process is currently soundly managed. Meanwhile, cocoa export volumes were much lower compared to previous years. This was offset by improved prices in the second half of 2013, mainly due to the weaker Kina. Cocoa volumes were impacted by the cocoa pod borer (CPB); the company has initiated a programme to manage the impact of CPB. The costs remain high for maintaining field advisory staff. The plantation activities sustained a loss of PGK1.5m ($567,600) in 2013, with this continuing to be absorbed as the company searches for medium-term improvements for a sustainable business model.

The hardware division was impacted by weaker domestic economic conditions. Low agricultural activity in the New Guinea islands region, exacerbated by weaker commodity prices, reduced business activity for the division. Notably, sales revenue at the Kimbe branch declined 40% year-on-year.

Company Strategy

NGIP Agmark management has embarked on efforts to strengthen reporting processes throughout the entire business with the implementation of a new general ledger platform, SAP Business One. This will also provide the back-end infrastructure to allow the management system improvements through the operational units.

The company remains optimistic despite forecasts showing that the sluggish business environment will persist into the next 12-18 months. We expect commodity prices to improve a little on the back of a weakening kina as well as with consumer demand starting to pick up in both America and Europe.