Karachi November 7 2023: Pakistan International Bulk Terminal (PIBTL) auditor indicates material uncertainty relating to going concern of the company operations as current liabilities exceed current assets by nearly Rs 10 billion.
Auditors of PIBTL indicates that the Company incurred a net loss of Rs. 2,156 million during the year ended 30 June 2023 and, as of that date, the Company’s current liabilities exceeded its current assets by Rs. 9,736 million. These events or conditions indicate that a material uncertainty exists that may cast significant doubt on the Company’s ability to continue as a going concern. Our opinion is not modified in respect of this matter.
During the year ended 30 June 2023, the Company experienced financial difficulties due to the market and macroeconomic conditions affecting the Company’s business volumes (in terms of quantities handled at the terminal), which declined significantly in the year 2023 from the level of 8,243,495 metric tons to 4,842,829 tons. Further due to economic factors such as devaluation of Pakistani rupees and high interest rates that prevailed during the year 2022 and 2023, the financial performance of the Company was also adversely impacted. As a result, the Company incurred a net loss of Rs. 2,156 million, its accumulated losses amounted to Rs. 3,916 million and its current liabilities exceeded its current assets by Rs. 9,736 million as at 30 June 2023.
The above factors led to non-payment of installment due on foreign loans as on 15 June 2023. However, subsequent to the year end on 1 August 2023, the Company entered into Standstill / Suspension agreement with the Lenders namely International Finance Corporation (IFC) and OPEC Fund for International Development (OFID) whereby all repayment obligations of the Company have been deferred and suspended till 15 December 2023 (resumption date) subject to interest that continue to accrue on such deferred amount. During the continuation of the standstill / suspension period the Company will be subject to certain operational / financial restrictions which mainly include non-incurrence of additional financial debt or guarantee, restriction on dividend or distribution, prohibition from capital expenditure and selling of assets etc.
In view of the above circumstances, the management and the Board has taken the following steps to assess the financial condition and sustainability of the future operations of the Company:
- The management has prepared five-year financial projection of the Company based on the current information available to estimate the future business cashflows. These financial projections are based on various financial and business assumptions such as expected business volumes, foreign exchange and interest rates and inflation factor etc. Such financial projections envisages that the Company would be able to generate sufficient cashflows through its operations and in order to meet its financial obligations particularly the amounts due to foreign and local lenders in terms its contractual obligations.
- The Company is also in the process of restructuring / reprofiling of its loans from Foreign Lenders with the objective to align the repayment schedules and other commercial terms with the expected business cashflows
- During the first quarter of the subsequent year ended 30 September 2023, the Company has achieved increased business volumes 1,987,423 metric tons. Further, the Company also paid the principal amount due on 15 June 2023 amounting to USD 3.426 million to Foreign Lenders on November 02, 2023.
- Sponsors / Shareholders have confirmed to provide financial support to the Company (if required) to meet the financial obligations and commitments of the Company so that the Company remains a going concern.
The Company recognizes that the above financial plan is subject to inherent risks and uncertainties associated with the above referred matters includes the ability of the Company to achieve the results set out in financial projections for the years 2024 – 2028. In this respect, particular challenges include, (but not limited to) Company’s ability to maintain and improve the handling volumes, retention of its customer base, stability in the economic factors such as foreign exchange and interest rates and overall economic conditions of the country.
The above facts and circumstances along with the risk and uncertainties, represents a material uncertainty which may cast significant doubt upon the Company’s ability to continue as a going concern. In case, the Company is unable to continue as a going concern, the Company may not be able to realize its assets and discharge its liabilities in the normal course of business. Nevertheless, after considering the financial projections and the commitment of financial support from the Sponsors / Shareholders, the Board have reasonable expectations that the Company will have adequate resources to continue its business for the forceable future. Accordingly, these financial statements have been prepared on going concern basis.