FINSA Forest Products Ltd recorded a loss of €3.4 million for the tax year 2011, according to accounts filed by the company in the last quarter of 2012.
The company, whose main business was to manufacture and sell timber products, saw a decrease in its turnover in 2011 to €10.5m from €15m in 2010, primarily due to a decrease in economic activity during the year and the cessation of production on the main line.
Although turnover dropped by €4.5m, the company recorded its loss on ordinary activities before tax at €3,412,500. Contributing to its losses was a €1.65m redundancy bill. This loss has been added to retained losses carried forward by the company.
The accounts showed that the number of employees at the plant went from 77 in 2010 to 37 in 2011. Of the 40 former employees, 36 were production staff, three were in sales and one was administration staff. Finsa had 29 production staff, four administrative staff and four sales staff employed in the year ending 2011.
According to its accounts since the company decided to stop production on its main line in December 2010, the company continued to sell products purchased from group companies to the Irish and UK markets and to retain some value added production activities.
In December 2011, the company also ceased any remaining value-added production activities and continues to sell finished products purchased from group companies to the Irish market.
In signing off on the accounts, the director noted they have considered the financial position of the company.
They “consider the entity to be a going concern because Finsa Group regard Ireland as a market with growth potential and consider the ongoing activities of Finsa Forest Products Limited as critical to achieving this growth. The company and the group are actively engaged in resolving the legacy issues from the previous manufacturing activities which have generated the losses in 2010 and 2011. The directors anticipate a return to profitability in 2012 following the resolution of these legacy issues,” the directors report states.
The director attributed turnover decreases in 2011 to €10.5m from €15m in 2010 primarily due “to a decrease in the economic activity during the year and the cessation of production on the main line”.
In the report, the directors said, “In an effort to bring margins to a more acceptable level, the company is continuously endeavouring to improve its operating efficiency and continues to concentrate its efforts on improving cost control at all levels of the operation. The main challenge facing the company in the immediate future will be to improve current margins to negate the current level of losses from being incurred in the future.”
However, in a letter submitted by independent auditors PriceWaterhouse Coopers, they outline “the company’s parent undertaking has not provided a commitment of ongoing support to the company”.
It adds that the company has liabilities of €4,491,533 and net current liabilities of €7,672,601 at December 31, 2011, while creditors repayable on demand at that time included €3,757,954 owed to group companies, together with accrued dividends of €3,426,567 repayable to a third party and other loans to a third party of €1,115,878.
The auditor stated, “We have been unable to form the view of as to the applicability of the going concern basis”. They do say in their opinion, proper books of accounts have been kept by the company but warn, “The balance sheet shows an excess of liabilities over assets and in our opinion on that basis there did exist at December 31, 2011 a financial situation which under Section 40(1) of the Companies (Amendment) Act 1983 would require the convening of an extraordinary general meeting of the company.”