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A huge financial crisis now faces the Fiji Sugar Corporation (FSC) Limited, its annual report for the financial year ending May 31, 2008 reveals.
The report indicates that the FSC is not only making substantial revenue losses, it also is challenged to reform the industry to generate revenue, so it can meet its various commitments to lending institutions, in particular overseas.
The FSC has even suggested that since current records showed that, uncertainties continued to surround its ability, also of the Group, to continue as “going concern”, meaning successful business operations.
“…If the Corporation and the Group is unable to continue as a going concern, it may be required to realise its assets and extinguish its liabilities,” the FSC 2008 annual report stated.
In its financial report, the FSC highlighted concerns of losses incurred in the 2008, 2006 and 2005 financial years, results of operating losses incurred from ordinary activities.
As at May 31 this year, FSC incurred a net loss of $19.4 million.
Further as at May 31, 2008, the current liabilities exceeded the current assets by $10.3 million and the Corporation had generated negative cash flow from operations, the report said.
“The Corporation’s revenue and margins are expected to decline in future due to expected reduction in the European Union (EU) prices,” the FSC said.
“Furthermore, the Corporation will be required to meet the repayment commitments for its loan from Export Import Bank of India, and the repayment is expected to commence from February 2009,” it added.
The FSC had entered into a contract with the Export Import Bank of India, by way of line of credit US$50.4 million (F$82,177 million) for the upgrade of its sugar mills.
The loan is secured by a Government guarantee and is repayable in successive half-yearly equal instalments over a ten-year period with an initial moratorium of 2 years,” says the 2008 company yearly report.
It says that interest of this loan is payable at the rate of the London Inter Bank Offered Rates (LIBOR) plus 0.5 per cent. It added that interest paid and or accrued had been capitalised to capital work in progress related to sugar mills upgrade and modernisation.
The report also highlighted advances from the Sugar Cane Growers Fund (SCGF) subject to 2 per cent annual interest rate and repayable by August this year; and subsidiaries: FSC Projects Limited ($638,005), and FSC Services (Pty) Limited of $17,277 – both advances unsecured, interest free and repayable on demand.
These constraints, the FSC said: “…will create financial constraints on the Corporation and the Group”.
“Consequently, the Corporation’s and the Group’s ability and ongoing existence and continuation are dependent on, among other things, successful and timely completion of the mill upgrade project, achieving mill efficiency together with reduction in operating costs, improved quantity and quality of cane supplies from farmers, and to generate adequate profits and cash flows to meet its commitments and obligations on a timely basis.”
The FSC said continued financial and other support from the Government and funding for the industry at large were critical for a long term sustainability and survival of the company and the industry.
