…Current Liabilities Exceed Current Assets By N3.5bn
The external auditor of Chellrams Plc has admitted that its ability to continue operations is threatened after the company’s shareholders’ funds were eroded and the firm ran into huge losses.
The Lagos-based firm is in the business of consumer goods, ingredients and consumer durables, and industrial chemicals. It operates through the following segments: Fast Moving Consumer Goods, Industrial Chemicals, Plastic Film, Machinery, and Others
Chellarams financial statement for the first quarter of 2024 shows that despite posting N13.78bn revenue in 2024 as against the N10.6bn of 2023, the firm spent a whooping N12.8bn on cost of sales and another N1.2bn on administrative expenses.
It also suffered a foreign exchange loss of N2.8bn.
These charges drove the group into crisis as it posted a N3bn loss in the first quarter of 2024, reversing the gains of N4.9bn profit earned in 2023.
Chellarams books which were audited by PKF Professional Services showed that its current assets exceeded its current liability by N3.5bn which indicated that the company may have problems meeting its short-term obligations.
As of March 2024, the group held a net current assets position of N7.8bn while the net current liability rose to N10.4bn as against N5.25bn in December 2023.
The firm blamed the negative equity on the foreign exchange fluctuations suffered by Dynamic Industries Ltd.
Recall that the Central Bank of Nigeria floated the naira in June 2023 which led to the depreciation of the currency by 98 per cent in 2023, from around N520 per dollar in June to N1000 in December 2024.
The currency has further depreciated to N1,700 in March 2024.
“The group and company recorded a loss after taxation of N3bn and N1.2bn in the current year. As of that date, the Group and Company’s current liabilities exceeded its current assets by N3.5bn (2023: N572.9m) for the group and N2.4bn (2023:N566.9m) for the Company.
“The shareholder’s fund of the Group has been eroded to the tune of N1.9 billion in the current year. Consequently, the going concern basis of the entity is threatened, which has raised doubt over its ability to continue as a going concern,” the auditors said.
The firm, however, said it is taking measures to reverse the position of its books.
Chellarams said, “Management had taken severe steps in rightsizing of our personnel, focused on all opportunities and continual improvement in management efficiency across the group companies.
“Procuring forex is a major challenge in the country and there is serious impact on imports. We have started
local procurement of chemical in our business and added two more SKU in current financial year which is helping us in achieving our target sales, product diversification and lesser dependence on forex.”
It also disclosed that Dynamic Ind Ltd has made the roadmap to come out from this negative net worth in this current fiscal year 2024-25.
“Additional working capital from Bank also was secured for N360mn for FY 24-25,” Chellarams said.