Gemini Sea Food suddenly drowning in troubles

Gemini Sea Food's underutilisation of production capacity while incurring increased cumulative losses in the year that ended on June 30, 2020 indicates that the company's future is now uncertain, according to the company's auditor.

The auditor's opinion was disclosed by the Dhaka Stock Exchange (DSE) on its website yesterday. After the disclosure was made, Gemini Sea Food's stocks dropped 0.07 per cent to Tk 144.30.

The company's cumulative balance of retained earnings remains negative, amounting to Tk 4.59 crore.

Gemini Sea Food owes about Tk 44.59 crore in the form of bank loans and lease finance, which accounts for 95.51 per cent of the company's equity and liabilities, the auditor said. The seafood producer's paid-up capital was Tk 4.69 crore, DSE data shows.

Furthermore, the company's use of its production capacity is very poor and is currently 15.14 per cent lower than last year's.

The auditor found some other anomalies and on the basis of these it provided qualified opinion in its financial reports.

The company's inventory is considerably high compared to its purchases, production capacity, cost of goods sold, and turnover as a whole, the auditor said.

Gemini Sea Food's total inventory was valued at Tk 25.73 crore, which is 55 per cent of the total asset. However, it did not keep any provision for the unsellable portion of the inventory, which was accounted for during that year.

The advances, deposits and pre-payment made by the company amount to Tk 9.4 crore, of which Tk 8.76 crore were advances to suppliers.

Therefore, unnecessarily blocking the company's working capital would affect its earnings, the auditor said.

But on the other hand, Gemini Sea Food blames a shortage of working capital as well as the ongoing Covid-19 pandemic for the lower production capacity utilisation.

The company announced that its earnings per share stood at Tk 9.83 in the negative for the last year while it was Tk 0.34 the previous year.

"The company's activities should be investigated by the stock market regulator to find the reason behind the fall," said Istiaque Razu, a stock investor.

After providing handsome dividends for the past few years, it makes no sense for the company to suddenly fall in trouble, he added.

Gemini Sea Food provided 10 per cent stock dividends in fiscal 2018-19 while it was 15 per cent the year before and 125 per cent the year before that.