WILL GHANA'S ALUWORKS LTD SURVIVE?

From all angles inferred from the 2017 financial year report of Ghana's Aluworks ltd released June 18, 2018, the future of the company now hangs on a balance.

Both the directors and the external auditors said so in plain language mainly because with yet another loss, Aluworks working capital position has become very fragile and new money and technology was badly needed.

For 5 years talks had been on to get a major shareholder, Caitlyn ltd to bring in needed new money and expertise but it will only do so if it ends up with not lower 50% of shareholding in the company.

That should be possible but SEC Ghana rules require that for this to happen,  shareholders must be polled to endorse it and Caitlyn does not want this. Instead, it is seeking a waiver from the authorities but that is not forthcoming either.

Now, the hope is to get majority shareholder, Social Security and National Insurance (SSNIT) to restructure and write off some of the money it is owed by the company in exchange for land sale. It is hoped that this may be approved within this month.

If not, all agree, there is no more light at the tunnel's end for Aluworks.

The company is quoted on the Ghana Stock Exchange and claims to be hit by market distortions by China imports. It produces Aluminium products and is also looking up to government for protection from China.

In 2017 year, its loss increased by 23.7% to GHc 23.88m despite efforts to bring down administration costs by 25.4% to GHc 8.56m.

The main aches were 35.3% rise in cost of sale to GHc 82.84m compared to lower 21.6% increase in core revenue to GHc 84.47m which was even watered down further by drop in Other income resulting in  only 10.8% rise in total income to GHc 86.1m.

Much as efforts were made to reduce short term debts within the year, 36.9% increase in medium term debts to GHc 52.12m and leap in working capital deficit to GHc 32.978m from GHc 29.182m amount to breaking point financial load.

But will SSNIT take the hint and concede as hoped for? That is to be seen but it seems obvious that it will help matters better if Caitlyn is carried along if  only for new technology direction much needed to become a real going concern again.

ALUWORKS LTD: GHc m, full year.
                                  2017.          2016
Total income.           86.1.          77.72
Core revenue.           84.47         69.47
Cost of sale.             82.84.        61.22
Gross profit.                1.63.          8.25
Other income.              0.199.       0.274
Administration.           8.56.         11.47
Operating profit.       (6.73).        (2.95)
Net finance.             (17.15).       (16.37)
Profit before tax.   (23.88).        (19.31)
Profit margin %.     (27.7).           (24.8)
Working capital    (32.978).   (29.182)
Overdraft.                   5.37.         6.28
Short term debts     17.23.       21.78
Medium loan            52.12        38.07
Trade payables.       31.48.       23.75
Retained earnings (86.128).   (62.251).

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