By Jithendra Antonio
Alufacb PLC (ALUF), a company which saw it shares rallying in the market in the recent past, yesterday informed the Colombo Stock Exchange that it expects to call an Extra Ordinary General Meeting (EGM) to inform the financial situation of the company and seek regulatory and shareholder approvals to capitalize its liabilities.
The company directors in a stock exchange filing informed that they are aware of the net asset value falling below half of the company’s stated capital value.
The company, which has been making “substantial losses” in the recent past, has retained losses worth Rs. 105 million as at December 31, 2010 with net assets a negative Rs. 48.6 million, according to the stock exchange filing.
And it also noted that corrected shareholder funds in the Company are comprised of negative Rs.48.62 million due to accumulated losses, whilst the stated capital is Rs.41.19 million.
Meanwhile, the filing further said that as stated in the previous annual reports, the company faced numerous hardships, as it invested in a subsidiary for the setting up of an advanced powder coating plant.
“Construction industry challenges, war, and the non-existence of local standards for powder coating , the company failed to make any inroads in to the market, “ the filing highlighted stressing the fate of the said subsidiary.
“Thus the company was not able to meet its financial obligations and was caught up in an interest spiral. Eventually the banks took legal action against the company and its subsidiary” the filing said, adding that the company and its subsidiary being unable to defend creditor’s action allowed judgment to be passed in favour of the creditor banks and financial institutions.
It also stressed that the company has accumulated losses over several years even prior to the enactment of the new Companies Act No.7 of 2007, whilst sever hardships were aggravated by the loss of two principal Directors who passed away.
The statement also said the remaining Directors P. Johan Classeon and T.N. Dole faced the multiple challenges of turning the company around, even financing the basic obligations of the business by providing several loans to meet the working capital requirements as well as statutory obligations penalties.
Accordingly, it said that the directors and major shareholders provided substantial loans more than double the paid up capital in non-interest bearing loans over the past decade, to sustain the business.
“Company will explore other means of raising capital equity, apart from converting present debt into equity” the filing noted.
Despite big losses, Alufab PLC (ALUF) share shot up as high as Rs.192.60 from Rs.54 levels in the recent past. Yesterday’s announcement by the company directly impacted the share, as it came down by 10 percent.
Massive losses disclosed by the company surprised punters and retailers in the Colombo Stock Exchange. Any person had glanced through the company’s financial statement may not have been surprised at all.
source - www.dailymirror.lk
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