The predicament of Aluworks, one of the oldest company’s in Ghana with regards to its publicly listed status has worsened further with the release of its financial performance for the third quarter of 2020. Even before the outbreak of COVID 19, the company had been struggling under the weight of narrow gross profit margins which were being completely eroded by administrative expenses and net finance expenses and the situation has worsened further over the past one year.
During the first nine months of 2020, the company’s revenues amounted to GHc48.534 million down 18.3 percent from the GHc59.412 million generated during the corresponding period of 2019. Because this resulted from lower business volumes cost of sales also reduced, but more slowly, from GHc56.854 million last year to GHc47.887 million this year.
Consequently, gross profit for the first none months of 2020 was just GHc646,000 down from GHc2.558 million for the corresponding period of 2019.
Like last year the gross profit was easily wiped away by general and administrative expenses even though these had been trimmed from GHc7.453 million last year to GHc5,431 million this year. However, this still left the company with a loss on operating activities of GHc4.702 million and a further GHc18.472 million in net finance expenses took its loss before tax to GJHc23,175 million which is 21.9 percent worse than the GHc19.006 million loss incurred in2019.
The increased loss raised the negative basic earnings per share from eight pesewas to 9.8 pesewas.
The increased loss has been accompanied by a contraction in the company’s balance sheet size; its total assets were GHc221.520 million by the end of September this year, down from GHc239.427 million a year earlier. Most worrying however is the fact that the company’s total equity has now turned negative to the tune of vGHc3.433 million down from a positive value of GHc54.679 million a year ago, this due to erosion of net value of the company by its rising net deficit which reached GHc 166.245 million in 2020.
In effect this makes Aluwork’s shares valueless in terms of its book value, a situation which sooner or later may call for regulatory intervention by the Ghana Stock Exchange’s management. Aluwork’s shares are currently trading at 11 pesewas a price where they have been stuck all year with little trading in the shares going on.