Golden Harvest Agro Industries in high liability risk

Infographic: TBS

Golden Harvest Agro Industries Limited – one of the leading frozen food and ice cream sellers of the country – is in a high liability risk with its bank loan amounting to 66.87% of the shareholders' equity.

MABS J and Partner said in an audit report for the fiscal 2021-22, the working capital of the company was mainly sourced from short-term bank loans. Most of the loans are interest bearing for which any upward changes in the interest rate may adversely affect the company's ability to loan servicing.

The management should note the consequences if there is any non-payment in servicing the loans, the auditor cautioned the company.

According to its financial statement, the total long-term and short-term loans of Golden Harvest Agro stood at Tk195.15 crore, which is 66.87% of the shareholders' equity.

The interest cost against these loans amounted to Tk11.20 crore in FY22 which is 36% of the total expenses of the company. This transpires that a significant portion of the total expenses is interest cost, the auditor noted in the report.

Company Secretary Nirmal Chandra Sardar, said, "Due to the coronavirus, the business was on a downward trend during the last two years. So the cost of debt as a percentage of the total cost of the company is showing higher. Business is good now. So there will be no problem in repaying the loans."

Asked how the business will improve amid high inflation, he said, people have become accustomed to frozen food due to Covid-19.

"Along with this, the number of consumers has also increased. This trend will continue. Our sales have increased in the first quarter of the current financial year, which indicates this change," he added.

In 2019, the company raised Tk89.93 crore by issuing right shares, of which Tk29.97 crore was used to repay loans. In 2013, it raised Tk75 crore from the stock market for business expansion and debt repayment. Tk33.84 crore was paid off at that time.

The auditor of the company also said, a provision for a Workers Profit Participation Fund (WPPF) of Tk2.78 crore has been provided by the company and the same is shown under the head of "Employees Welfare Fund, Bangladesh Workers Welfare Fund and Workers Profit Participation fund". However, the amount has not been distributed as per the Labour Act 2006.

The auditor also gave an opinion regarding the share money deposit. It said the company provided Tk4.83 crore as a share money deposit to Golden Harvest QSR Ltd, a subsidiary of the company, which has not yet converted into share capital within the six months period as per the circular of the Financial Reporting Council.

Meanwhile, Golden Harvest recommended a 2% cash dividend only for its general shareholders for the FY22, despite it having incurred losses.