The auditors found no assurance on whether the condition of these companies would get better next year
Six companies listed in the share market are struggling to survive after suffering from losses and liquidity crises for years.
Statutory auditor Mahfel Huq & Co stated that the financial health of these companies are not satisfactory due to a multitude of factors, such as not being able to sell products, rising debts, consecutive losses and severe liquidity crisis.
The companies are Maksons Spinning, RN Spinning, Khan Brothers PP Woven Bag Industries Ltd, Zeal Bangla Sugar, Shyampur Sugar and Renwick Jajneswar & Co Ltd.
The auditors found no assurance on whether the condition of these six companies would improve next year. Speaking to The Business Standard on the condition of anonymity, several partners of the audit firm said they are concerned about the future of these companies.
Maksons Spinning Mills
Commenting on the Maksons Spinning's financial report for the 2018-19 accounting year, the auditors observed that the company's net profit went down by 75 percent compared to the previous accounting year.
Maksons Spinning made a profit of Tk3 crore during the period, compared to Tk12 crore in the accounting year 2017-18.
The reasons behind the decline of profit are the increase in production costs and poorer sales.
Maksons Spinning has also been suffering from a liquidity crisis for the past five years.
In the 2018-19 accounting year, Maksons Spinning's net operating cash flow per share was negative Tk0.10.
These conditions indicate that a material uncertainty exists that may cast significant doubt on the company's ability to continue as a going concern, the auditors noted.
Responding to the query, Maksons Spinning Managing Director Mohammad Ali Khokon said, "The cotton market across the globe is not performing very well. The production cost has also gone up due to the increasing fuel prices. Our business is suffering because of these issues."
Responding to the audit firm's observation, he said Maksons Spinning is trying to overcome the hurdles.
The company suffered a loss of Tk0.02 per share in the first quarter (July-September) of the current accounting year. Its earnings per share stood at Tk0.09 in the corresponding quarter of the previous accounting year.
On Sunday, the closing price of Maksons Spinning shares was Tk4.40 at the Dhaka Stock Exchange.
RN Spinning Mills
All production of the RN Spinning Mills Ltd has remained halted since last year, after a fire gutted its factory.
The auditors said the company's net loss stood at Tk612 crore at the end of the 2018-19 accounting year.
"The company suffered a huge loss mainly due to the fire in the factory. These events or conditions indicate that a material uncertainty exists that may cast significant doubt on the company's ability to continue as a going concern," noted the auditors.
RN Spinning Mills Ltd Company Secretary Hannan Molla told The Business Standard, "The fire seriously damaged our factory. But we are insured by the Union Insurance and an audit is going on for the insurance claim.
"The company will return to production after claiming the insurance."
On Sunday, price of RN Spinning Mills Ltd shares closed at Tk3.10 at the Dhaka Stock Exchange.
The auditors have observed that the Khan Brothers PP Woven Bag Industries' financial statements described the events or matters that may cast significant doubt on the company's ability to continue as going concern.
The company disclosed under Cash and Cash Equivalents an FDR amounting to Tk9.8 crores, with non-banking financial institution Peoples Leasing and Financial Services Ltd.
Currently the financial institution's ability is in doubt to continue as a going concern.
The company has also reported earnings per share of Tk0.25, for the accounting year 2018-19, compared to Tk0.72 for the same period in the previous year.
In the accounting year 2019-20, Khan Brothers showed a loss per share of Tk0.05, compared to Tk0.10 in the previous year.
On Sunday, the price of the company's shares closing price was Tk5 at the Dhaka Stock Exchange.
Zeal Bangla Sugar
The Zeal Bangla Sugar Mills Ltd has been suffering losses for years because the company could not sell the sugar it produced.
Commenting on the company's financial report for the 2018-19 accounting year, the audit firm said, "The net asset value and retained earnings of Zeal Bangla Sugar is negative and from our observation it looks like the company has not been able to generate a profit for a few years.
"From our observation, it also seems that the company is unable to run its operation without government support. The company has also not generated operating revenue in the past few years."
The company suffered a loss of Tk103.90 per share in the 2018-19 accounting year. The net asset value per share stood at negative Tk608 and its net operating cash flow per share is negative Tk92.50.
On Sunday, the price of Zeal Bangla Sugar shares dropped by 7.30 percent at the Dhaka Stock Exchange and the closing price of each share was Tk32.90.
Shyampur Sugar Mills
The state-owned company Shyampur Sugar Mills Ltd is also unable to sell their produced sugar. Due to a rise in production costs, Shyampur Sugar Mills Ltd is selling sugar at a loss.
According to the audit firm, "The accompanying financial statements have been prepared assuming that the company will continue as going concern.
"But considering the recurring losses, high production costs and net capital deficiency by TK434 crore has exposed significant doubt, without government support, of the survival of the company as going for foreseeable future."
The company suffered a loss of Tk867.97 per share in the 2018-19 accounting year. During that period, the company was only able to earn Tk51,420.72 (on average) by selling each tonne of sugar, though the cost of production of sugar per tonne is Tk228,000.
This creates a net loss of Tk176,579.28 per tonne.
On Sunday, the price of Shyampur Sugar Mills shares dropped by 7.02 percent at the Dhaka Stock Exchange and the closing price of each share was Tk21.40.
The company's peak share price was Tk42.20 in the last year.
The Renwick Jajneswar, which provides engineering support to other sugar mills, is owed Tk50 crore in dues from various sugar mills under Bangladesh Sugar and Food Industries Corporation.
This was revealed in the company's financial statement of the 2018-19 accounting year.
The auditors have expressed concerns on whether the dues will be recovered. The audit report stated that unless the dues are collected, the company's future will be jeopardised in the coming years.
In the previous accounting year, the company made a net profit of Tk84 lakhs but its accumulated loss stood at Tk6 crore. The closing price of each share of Renwick Jajneswar was Tk981.50 on Sunday at the capital city bourse.
Commenting on the matter, Chairman of Bangladesh Sugar and Food Industries Corporation Ajit Kumar Pal said, "Production prices have gone up, so companies are selling sugar in the market at a loss.
"A new initiative has been taken to turn the state-owned sugar mills profitable again. These mills will be modernised. There are also plans to cultivate better quality sugarcane. We have asked the government for funds to implement these plans."