adminfailing to raise enough funding to recapitalise its business.
During the year, directors of Charhons decided to offload excess assets to recapitalise the business. One of the assets was sold but the proceeds realised from the sale were not enough to meet the requirements of the business.
M.E Charhons realised about US$630 000 from the sale of the assets and secured an additional US$400 000 loan from a local bank.
It is estimated that M.E Charhons requires about US$2 million for recapitalisation and given strong shareholders support the company can be profitable.
Dairiboard spokesperson Mrs Imelda Shoko confirmed the sale of assets. She also confirmed that the two shareholders were discussing the recapitalisation of the company.
“The two shareholders (Cairns Holdings Limited and Dairibord Holdings Limited) are currently discussing the way forward,” she said in her written response.
Cairns own 60 percent of M.E Charhons while Dairibord owns the remaining 40 percent.
ME Charhons is being weighed down by working capital constraints, and is in a loss-making position.
Undercapitalisation of M.E Charhons has affected the bottomline for the two shareholders.
M.E Charhons contributes about 20 percent to group turnover and its performance has had an impact on the group financial position.
During the six months ended February 2011, Cairns group turnover was US$10,8 million.
An operating loss of US$500 000 was incurred and US$400 000 of this was attributable to M.E Charhons.
For the six months ended June 2011, Dairibord said M.E Charhons contributed a loss of US$125 471 compared with a profit of US$1 869 from the same period last year.
Analysts this week said it could be time for Dairibord to shore up its shareholding in M.E Charhons if the opportunity arises.
Cairns posted a US$1,2 million loss in the six months to February and might decide to reduce its stake in the loss-making entity.
Online Reporter