Safko Spinning’s survival in doubt as auditor flags serious going-concern risks
In the report, Fauzia Haque FCA, Partner at FAMES & R, Chartered Accountants, highlighted multiple accounting irregularities, financial weaknesses, and instances of non-compliance with applicable laws in the company’s financial statements.
The auditor of Safko Spinning Mills Limited has raised serious doubts about the company's ability to continue as a going concern, citing deepening financial distress, prolonged production suspension and multiple compliance failures.
The concerns emerged following the audit of the company's financial statements for the 2024-25 fiscal year, which paint a grim picture of its financial health. As of 30 June 2025,Safko Spinning's accumulated losses stood at Tk97.81 crore, while outstanding bank loans amounted to Tk142.24 crore.
According to the audit report, the company's position has further deteriorated due to the sale of inventory at nominal prices and the continued suspension of production activities. In light of these factors, the auditor stated that there is significant uncertainty over the company's ability to continue its operations or return to normal business conditions.
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Yesterday (25 December), the share price of the company closed at Tk13.40 on the Dhaka Stock Exchange (DSE).
In the report, Fauzia Haque FCA, Partner at FAMES & R, Chartered Accountants, highlighted multiple accounting irregularities, financial weaknesses, and instances of non-compliance with applicable laws in the company's financial statements.
The audit revealed that the company failed to provide adequate supporting documentation for inventory worth approximately Tk3.21 crore and relied solely on management-issued inventory certificates. Additionally, no provision was made against loans of Tk115.49 crore obtained from Bank Asia.
The auditor also pointed out deficiencies in supporting documents related to advances, deposits, and prepayments. Despite recurring losses, the company recognized unabsorbed depreciation as a Deferred Tax Asset, which is dependent on uncertain assumptions about future profitability.
Furthermore, the report noted that dividends amounting to Tk11.31 lakh, which remained undistributed for over three years, were not transferred to the Capital Market Stabilisation Fund (CMSF) as required by law.
Serious observations were also made regarding tax compliance. During the audit period, the deducted TDS and VAT from various transactions were not deposited into the government treasury.
The company's persistent losses have directly affected shareholders. For the 2024-25 fiscal year, Safko Spinning reported a loss per share of Tk7.52, leading the board of directors to decide against declaring any dividend for the year.
Safko Spinning Mills Limited was listed on the stock exchange in 2000 and has a paid-up capital of Tk29.98 crore. Approximately 70% of the company's shares are held by general investors, excluding sponsors and directors.
