May 10, 2011 (LBO) - Sri Lanka's Alufab has called an extraordinary general meeting to seek regulatory and corporate approvals to capitalise the liabilities of the company whose net assets have fallen below half of its stated capital.
The company, which has been making "substantial losses" in the recent past, has retained losses of 105 million rupees as at December 31, 2010 with net assets a negative 48.6 million rupees, according to a stock exchange filing.
It has called an extraordinary general meeting on June 02, 2011 to consider a report to shareholders on its current financial status.
Alufab Limited does fabrication and installation of glazed aluminum windows, doors, partitions and the sale of aluminum bars, glass, hardware and accessories.
The statement said the company sees new opportunity with the end of the island's 30-year ethnic war in 2009 and increase in construction.
It seeks regulatory and corporate approvals to capitalise the liabilities of the company, the statement said.
It also said that with "lower cost of capital and favourable sentiment on the stock market" company will pursue options to raise capital to meet working capital needs and repay debt which will help reduce debt service charges and improve profitability.
The company said it faced "numerous hardships" in the last three years after it invested in a subsidiary to set up an advanced powder coating plant called Eurocoat Ltd. which was internationally certified.
"Unfortunately, in view of the continuous challenges faced by the construction industry due to the war, and the non-existence of any local standards for powder coating, the company failed to make any inroads into the market," it said.
Both businesses suffered owing to loss of market share and underutilisation of plant while having to comply with certification and environmental compliance.
The company was caught up in an "interest spiral" and eventually banks took legal action against the company with judgement in favour of lenders, the statement said.
Alufab directors and major shareholders have given interest free loans to sustain the business but the company's default on loans led to directors being reported to authorities who monitor borrowers, preventing them from borrowing any more, it said.
source - www.lbo.lk
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