Auditor flags high liability risk for Golden Harvest

Infographic: TBS

Golden Harvest Agro Industries Limited – one of the leading frozen food and ice cream sellers in the country – is facing a high liability risk, with its bank loans amounting to 71% of shareholders' equity.

SF Ahmed & Co stated in an audit report for the fiscal 2023-24 that the company's working capital was primarily sourced from short-term bank loans. 

Most of these loans are interest-bearing, meaning any upward changes in interest rates could adversely affect the company's ability to service its loans, it added.

The auditor cautioned the company about the potential consequences of non-payment, urging the management to take note of the risks involved.

According to its financial statement, the total long-term and short-term loans of Golden Harvest Agro stood at Tk190.43 crore, which accounts for 71% of shareholders' equity. 

The interest cost on these loans amounted to Tk12.90 crore in FY24, representing 36% of the company's total expenses. This indicates that a significant portion of the total expenses is dedicated to interest payments, the auditor observed in the report.

A senior officer of the company, speaking to The Business Standard on condition of anonymity, said the company has struggled since 2019, primarily due to the impact of the Covid-19 pandemic and ongoing economic challenges. The rising interest costs have further worsened the company's difficulties.

The officer added that the business has been on a downward trend in recent years, resulting in debt costs accounting for a higher percentage of the company's total expenses. Despite these challenges, the company has managed to avoid loan defaults and continues to pay dividends to its investors.

In 2013, Golden Harvest raised Tk75 crore by issuing shares at Tk25 each, including a premium of Tk15. Of this amount, Tk33.84 crore was used to repay loans, while the remainder was allocated for business expansion and the establishment of an ice cream factory.

Controversial individuals bought placement shares of Golden Harvest. According to the company's IPO prospectus, notable placement shareholders included Anisuzzaman Chowdhury, a former director of United Commercial Bank; Zahid Maleque, a former minister of the ousted Awami League government; Matiur Rahman, a former member of the National Board of Revenue (NBR); and Peoples Leasing.

Later, in 2019, the company raised Tk89.93 crore by issuing right shares, of which Tk29.97 crore was used to repay loans.

On Wednesday, its shares closed at Tk10.10, a 2.91% decline from the previous session.

Due to the business deterioration, the company's dividend payout dropped to only 2% cash in FY24, compared to 7% cash and 5% stock in FY19.

Ups and downs

Before its stock market listing in 2013, the company had demonstrated promising business performance. In June 2011, its revenue stood at Tk52.65 crore, with a net profit after tax of Tk13.23 crore. 

Six years later, its revenue surged to Tk224 crore, and its net profit reached Tk24.28 crore, marking the best year in Golden Harvest's business history.

In 2018, the company applied to issue rights shares to expand its business and received BSEC approval in October 2019. 

However, after utilizing the funds raised from the rights shares, both its revenue and net profit began to decline.

During the 2020-21 and 2021-22 fiscal years, the company's revenue dropped significantly, and it incurred substantial losses, depriving general investors of their expected returns. No dividend was recommended for FY20.

In FY23, the company managed to post a profit, but in the following year, it reported a loss of Tk20.72 crore. Its revenue for the last fiscal year stood at Tk91 crore.

In the July-September quarter of FY25, the company's revenue dropped by 28% to Tk20.59 crore, with a loss of Tk1.97 crore.

As of the end of September, its net asset value per share stood at Tk12.76, down from Tk13.41 at the same time the previous year.