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PSM incurs losses from 2008 to 2010

IQBAL MIRZA KARACHI: Pakistan Steel Mills incurred losses of Rs 26.526 billion and Rs 11.566 billion during the finan
Published September 11, 2012

pakistan-steel-millIQBAL MIRZA

KARACHI: Pakistan Steel Mills incurred losses of Rs 26.526 billion and Rs 11.566 billion during the financial years 2008-09 and 2009-10 respectively, according to the draft financial statements of Pakistan Steel Mills Corporation (Private) Limited for the year ended June 30, 2011 available with Business Recorder here on Monday.

 

The draft audit report contains certain qualifications which have been briefly explained as under:

 

In the financial statements sent to the Board of Directors on June 22, it has been pointed out that contrary to the results of forensic investigation report, which has confirmed that out of aggregate loss of Rs 26.526 billion incurred during 2008-09, Rs 9.99 billion and Rs 11.846 billion were on account of corruption and negligence and mismanagement respectively.

 

The financial statements reflect the entire amount of loss (included in un-appropriated profit) as a business loss. “Management has not made any disclosure of such events and ongoing investigations, which we consider necessary for proper understanding of the financial statements. Further, since the outcome of such investigations and possible legal proceedings cannot be determined until the completion of such process, we were unable to determine the impact, if any, on the financial statements.”

 

“In addition to the responsibility for establishing a sound system of internal control to prevent and detect fraud, it is the responsibility of the management, the Board and the investigation agencies concerned to determine whether or not alleged frauds and irregularities have actually been perpetrated, and if so, what was the extent and impact of such frauds and the persons responsible for the same for the purpose of initiating steps for the recovery of losses caused and preclude such recurrences,” it said.

 

During the year under review the financial position further deteriorated as depicted below:

 

- Loss for the year amounted to Rs 12.434 billion and accumulated losses amounted to Rs 40.914 billion

 

- Negative operating cash flows of Rs. 4.463 billion.

 

- The corporation operated at around 36 percent capacity due to which the fixed cost could not be absorbed.

 

- Current liabilities exceeded the current assets by Rs 21.123 billion; and

 

- Defaults in repayments of principal amounts pf loans and mark-up thereon have been disclosed in separate not.

 

It has further been stated that although material uncertainty exists due to the above factors which raised doubts on the Corporation’s ability to continue as a going concern, management is confident that the going concern assumption is appropriate for the reasons that the Corporation has in the past, and continues to receive necessary support from the Government of Pakistan through various bail out packages. Accordingly, the financial statements have been prepared on a “going concern basis”. Brief summary of support that the Corporation has been receiving from Government of Pakistan has been presented as under:

 

In the month of November 2011, the Cabinet Committee for Restructuring (CCOR) had been presented a Financial Assistance Plan (FAP) for its principle approval. Subsequently, the FAP was also approved by the Economic Coordination Committee of the Cabinet (ECC), the Prime Minister as well as the Federal Cabinet. Main features of FAP were as follows:

 

- Finance facility of Rs 11 billion at a tentative mark-up rate of 14 percent, for financing of working capital whereby repayment of principal would be deferred to three years. Out of total amount rupees six billion would be provided as immediate relief for the opening of LCs and rupees five billion had been linked with the appointment of CEO.

 

- Government of Pakistan to bear the mark-up for the first three years of Rs 5.12 billion against issue of shares.

 

- Restructuring of principal amount of the term loan amounting to Rs 7.885 billion with mark-up to be paid as per schedule.

 

- Waiver of late payment surcharge (LPS) amounting to Rs 1.117 billion billed by Sui Southern Gas Company Limited on outstanding amount of gas charges. Further, outstanding gas charges of Rs 4.125 billion to be paid in 36 equal installments.

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