Sugar refiner starafricacorporation has narrowed its full-year loss to $7.2 million from $12 million in the prior year but its auditors have raised alarm over the group’s going concern status after it reported significant losses for the sixth year running, with its current liabilities exceeding assets by $52.2 million.
In the full-year to March, starafricacorporation had also exceeded its borrowing powers by $41.3 million, the group’s auditors, Ernst & Young said.
The auditors also issued a qualified opinion “in respect of a limitation of scope related to determining the extent of impairment of assets”.
They noted that the cash flow projections used for starafricacorporation’s Harare sugar refinery plant – which is operating at a loss but has a carrying amount of $10.7 million — are dependent on “assumptions that could not be assessed for reasonableness as they are dependent on uncertain future events”.
“Due to the high degree of estimation currently involved in the projected volumes that the business can sell over a certain period of time, we were unable to obtain sufficient evidence to confirm whether the projected volumes are reasonable and consequently whether the recoverable amount for the plant exceeds the carrying amount,” said E&Y in an opinion accompanying the group’s delayed financial results for the full year to March.
The conditions at the company, E&Y said, indicate the existence of a “material uncertainty which may cast significant doubt on the company’s ability to continue as a going concern”.
Goldstar Sugars increased production by 68 percent to 7 743 tonnes for the year but sales volumes remained low due to poor market uptake.
Country Choice Foods made a profit of $506 000, compared to $330 000 achieved in the prior year.
Going forward, the group expects improved sales after government imposed a 10 percent duty on sugar imports of over $100 on a sliding scale.
Last month, the group said it had reached an agreement to sale subsidiary Bluestar Logistics to an unnamed buyer by September 30 but is still looking for takers for its 33 percent stake in Tongaat Hulett Botswana (THB) to raise funds to make part settlements to creditors and proposed a debt to equity swap to improve its balance sheet.
The company has been looking to sell Blue Star and the THB stake since 2013 without success after entering into a scheme of arrangement with its creditors when it failed to settle debts in excess of $20 million. The scheme of arrangement is valid for 24 months.
It said selling the THB stake was proving difficult because “interest from Botswana is low due to onerous requirements from other shareholders in THB”.-The Source