Nigerian Enamelware Plc which is engaged in the manufacturing and marketing of enamelware, plastic products, and galvanised bucket, issued a frank warning to investors and the general public in its 2024 audited financial statement filings.
“There is substantial doubt about our ability to continue as a going concern,” according to “The Company has recorded accumulated losses for the year ended 30th April, 2024 and the shareholders fund is in the negative. Consequently, the going concern consideration of the Company is threatened.”
The company joins firms that are technically insolvent as they succumbed to the macroeconomic headwinds.
In its filings, Enamelware said the reason for the qualified audit report borders on recurring losses, negative shareholders’ funds, and deteriorating cash position.
For the year ended April 30, 2024, Enamelware posted a loss after tax of N2.59 billion from a profit position of N1.68 billion as at April 2023.
Since the company’s total assets are less than total liability, it has a negative shareholders’ fund of N744.25 million in the period under review.
Analysis by MoneyCentral shows the company’s precarious situation was exacerbated by N2.66 billion provision for bad debt that is higher than the N718.33 million revenue realised in 2024.
Bad debt is the term used for any loans or outstanding balances that a business deems uncollectible. For businesses that provide loans and credit to customers, bad debt is normal and expected. There will likely be customers who can’t pay their debts back.
Because you can’t be sure which loans, or what percentage of a loan, will translate into bad debt, the accounting method for recording bad debt starts with an estimate.
This estimate is called the bad debt provision or bad debt allowance and is recorded in a contra asset account to the balance sheet called the allowance for credit losses, allowance for bad debts, or allowance for doubtful accounts. It’s recorded separately to keep the balance sheet clean and organized. Often, estimated bad debt is referred to as doubtful debt.
Owners of the company need to inject more capital to salvage it from bankruptcy since customers are unable to pay down their debts due to the tough and unpredictable macroeconomic environment.
Nigerian Enamelware is listed on the NGX and has a market capitalisation of N1.46 billion.
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