Lanka Cement, a state owned firm with a defunct factory in northern Sri Lanka, has revealed heavy losses and plans to revive production in its latest accounts which the auditors have refused to give an opinion on.
According to a stock exchange filing the firm made a loss of LKR 9.9 million in the nine months ending September 30th 2010 compared with a profit of 18 million the previous year. Sales fell to LKR 159 million from almost LKR 500 million the year before.
According to unaudited accounts filed with the stock exchange, the firm made a loss of LKR 3.4 million for the September 2010 quarter against a loss of LKR 2.5 million the previous year with sales falling to 50 million rupees from LKR 123 million.
The Colombo Stock Exchange moved Lanka Cement out of the bourse's default board, where it had been for not presenting accounts, after it submitted financial statements for the March, June and September quarters of 2010.
Lanka Cement has accumulated losses of LKR 1.7 billion according to its annual report for the year ending December 31st 2009, the latest available, which auditors KPMG Ford Rhodes Thornton & Co said raise doubt that the company will be able to continue as a going concern.
The auditors have refused to give an opinion on the accounts for the year ending December 31st 2009 and have also drawn attention to their inability to verify several transactions in the accounts.
Lanka Cement shares have seen bouts of heavy trading from time to time owing to interest by foreign cement firms in reviving a defunct cement plant sitting on a rich deposit of limestone in northern Jaffna.
With the end of the island's 30 year ethnic war in 2009, demand for cement is recovering, especially in rebuilding in the war-torn north and east, along with construction elsewhere as economic growth accelerates.
KPMG Ford Rhodes Thornton & Co noted that Lanka Cement's net assets are less than half of its stated capital and that it faces a serious loss of capital.
The auditors said they were unable to verify property, plant and equipment with a carrying value of LKR 859 million as at December 31st 2009 and that they were unable to verify the existence, completeness and accuracy of local cement purchases amounting to LKR 186 million.
They also said they were unable to verify the completeness and accuracy of sales in northern Jaffna worth LKR 313 million due to improper documentation.
KPMG Ford Rhodes Thornton & Co said that "We were unable to verify the accuracy and completeness of the recording cash receipt and the cash payments since the company doesn’t maintain proper double entry system of accounting / control accounts and reconciliations when recording cash receipt and the cash payments."
They also said they were unable to verify the existence of a long term loan payable to the main shareholder Sri Lanka Cement Corporation amounting to LKR 757 million due to lack of documentation and that they were unable to assess the appropriateness of the classification of the loan as non-current liability.
Lanka Cement has said it intends setting up a packing and grinding plant at Kankesanthurai in Jaffna to increase profitability in the near future.
source - www.steelguru.com
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