The auditors of two listed companies-Global Heavy Chemicals and Metro Spinning-have raised red flags over their ability to sustain business operations.
In their latest audit opinions included in the FY25 financial statements, the auditors said it was necessary to inform investors about the companies' current financial conditions. The Dhaka Stock Exchange (DSE) published the disclosures on Tuesday.
Global Heavy Chemicals
According to the auditor, Global Heavy Chemicals' FY25 financial statements show that the company had only Tk 1 in current assets against Tk 8.14 in current liabilities.
The auditor noted that the company will be unable to repay Tk 1.38 billion in liabilities due within a year with only Tk 0.17 billion in current assets, which could disrupt its supply chain.
The auditor also found that the company's sales declined by 58 per cent, while selling and distribution expenses increased by 16 per cent during the same period. This reverse trend was flagged as a significant risk.
"Such substantial increases in selling expenses, particularly during a period of declining net sales, raise concerns regarding the appropriateness, necessity, and authorization of these expenditures," the auditor said.
The auditor further observed that the company temporarily shut down operations without clear justification and later resumed production at a much lower scale in FY25, which was described as risky behaviour.
In addition, the company increased the value of its fixed assets more than once but failed to rationalise building costs by charging impairment losses, thereby weakening asset quality, the auditor said.
Metro Spinning
The auditor of Metro Spinning reported that the company has been incurring consecutive losses, pushing retained earnings to a negative Tk 583.70 million, which poses a serious risk to its sustainability.
"These events or conditions, along with other matters, indicate that a material uncertainty exists that may cast significant doubt on the Company's ability to continue as a going concern. The financial statements do not adequately disclose this matter," the auditor said.
The auditor also noted that the company did not charge any depreciation in FY25, which undermined the quality of its assets.
"Depreciation does not cease when an asset becomes idle or is retired from active use unless the asset is fully depreciated," the auditor said.
The quality of trade receivables was also questioned, as many receivables were long overdue but no provision for bad debts had been made.
In addition, the auditor found a shortfall in the company's dividend account, raising concerns that unclaimed dividend funds may have been misused.
The company also collected taxes from customers on behalf of the government but failed to deposit the amounts to the exchequer, which the auditor described as a clear violation.
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