Sitara Peroxide loss more than doubles

September 25, 2024 (MLN): Sitara Peroxide Limited (PSX: SPL) suffered steeper losses in fiscal year 2023-24 as its sales plummeted during the year.

Net loss for the year widened to Rs792.78 million from a loss of Rs341.2m. That translates to a loss per share of Rs14.39.

Its revenue shrank 52.7% to Rs824m as compared to Rs1.74 billion in FY23. Gross loss surged by 332.6% to Rs273.39m in FY24.

The company's current liabilities exceeded current assets by Rs792.79m as of June 30, 2023, the company said in a stock filing on Wednesday.

It said that it was unable to pay installments of long-term financing and rental payments on sukuks during the year.

Further, the plant of the company remained shut down from October 20, 2022 to March 02, 2023 and then again from June 12, 2023 to date.

These factors indicate the existence of a material uncertainty, which may cast significant doubt about the company's ability to continue as going concern, it stressed.

"However, the company's management believes that going concern basis of preparation of the financial statement is appropriate, based on plans for the Balancing, Modernization, and Rehabilitation (BMR) of the plant to increase the production capacity and plant efficiency, which also requires significant amount of funding," it said.

"The ability of the company to continue as going concern depends on the ability of the company and its sponsors to sell the assets of an associated company and generate sufficient funds so that the same can be injected in the company to carry out BMR activities.

"Further, after selling the assets of the associated company, the capital injection from sponsors would still not be enough to meet requirements of BMR activities and necessary working capital to run the plant after BMR," it added.

To meet this shortfall in funding, the company plans to obtain long term supplier credit or approach private equity firms for additional funding.

The ability of the company to remain as going concern is therefore dependent on the above assumptions, which are premised on future events and market conditions, the outcome of which is inherently uncertain.

The financial statements have been prepared on the assumption that the company will continue as going concern.

"In view of the material uncertainty in respect of the company's ability to continue as going concern and the lack of sufficient appropriate audit evidence in confirming whether the company and its sponsors would be able to provide required funding for the company's BMR activities and working capital requirements, we were unable to conclude whether the use of the going concern assumption in the preparation of these financial statements is appropriate," it noted.

"If the company is unable to continue in operational existence for the foreseeable future, and the company may not be to discharge its liabilities in the normal course of business adjustments may have to be made to reflect the situation that assets may need to be realized other than in the normal course of business and at amounts which could differ significantly from the amounts at which they are currently recorded in the statement of financial position," it added.

In addition, the company said it may have to provide for further liabilities that might arise, and to reclassify non-current assets and liabilities as current assets and liabilities. No such adjustments have been made to these financial statements.

The company's property, plant and equipment is carried in statement of financial position at Rs2.56 billion.

The management has not performed an impairment assessment of the plant as required under International Accounting Standard 36 "Impairment of Assets, despite the plant of the Company has remained shut down from October 20, 2022 to March 2, 2023 and then again, in June 12, 2023 to date,

Moreover, the existing plant requires BMR to operate efficiently.

"We were unable to confirm or verify by alternative means- whether any adjustments might have been found necessary in respect of property, plant and equipment, and the elements making up the statement of profit or loss, the statement of comprehensive income, the statement of changes in equity and the statement of cash flows," it said.

Amount in thousand except for EPS

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