There are expectations of a bumper cocoa crop in 2023, according to the new CEO of Papua New Guinea’s largest cocoa exporter, NGIP Agmark. However, Steven Nightingale tells Business Advantage PNG that profitability will depend on tighter control of rising costs. 

According to non-for-profit international organisation CABI, 80 per cent of cocoa grown in PNG come from smallholders who depend on it for their livelihoods.

Despite experiencing drought, bush fires, mounting inflation and wage pressures, as well as pest-related crop damage, agricultural exporter NGIP Agmark still managed to end 2022 in profit, with returns from its logistics, engineering and equipment supply operations offsetting disappointing returns from cocoa and coffee exports. 

Newly appointed CEO Steven Nightingale tells Business Advantage PNG that 2023 is looking much stronger: the company is gearing up for a bumper crop, up between 25 and 50 per cent on last year’s. 

‘We are bracing ourselves for an increase in costs, with fuel being a core driver of higher goods and services.’ 

Given that local farmers, courtesy of having the shortest supply chains, receive 90 per cent of the cocoa market price, NGIP Agmark has to work hard to maintain its fairly modest margins. 

Containing costs

Agmark’s Steven Nightingale.

Nightingale fears that profitability, regardless of the cocoa price, risks being offset by rising costs. 

‘In 2023, we are bracing ourselves for an increase in costs, with fuel being a core driver of higher goods and services and this is also adding to existing wage pressures,’ says Nightingale, who succeeded his father, the late John Nightingale, as CEO in December 2022. 

‘While we could pass on those costs, we would pay less per bag, and we need to get a gross margin of 10 per cent-plus to be profitable.’ 

Nightingale tells Business Advantage PNG that the two key priorities in 2023 are ensuring export contracts are in place for the first six months of the year, and that all its vessels are up and running with no breakdowns. 

Efficiencies

The PNGX-listed company has been able to maintain a shareholder dividend for the past consecutive three years. Nightingale attributes this to the disciplines implemented during COVID, which also coincided with his appointment to Chief Operating Officer in 2020. 

With the company at breaking point in 2019, Nightingale worked closely with Chief Financial Officer Warwick Lung to find efficiencies that would ensure the company’s survival. 

‘COVID demanded a different management approach, and both Warwick and I shared similar views on how the company needed to be run,’ explains Nightingale. 

‘We knew that any turnaround would be based on two key drivers: cost cutting/containment and a pushing down on managers to share greater responsibility for outcomes.’ 

Green shoots 

While PNG’s annual cocoa production remains around half the 60,000 tonnes reached before the cocoa pod borer started affecting crops in 2006, Nightingale is confident the recent drought will help to reduce the crop’s exposure to the pest in 2023. 

Meantime, Nightingale expects soon to be able to announce new developments currently in the pipeline, including ongoing collaboration with the business arm of East New Britain Province – which owns 12 per cent of company – on further transport and logistics synergies. 

‘In 2023, I expect the company to continue reaping the benefits from the tough decisions and recovery strategies we’ve embarked on over the last few years.’