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Wednesday, February 1, 2023

Notore’s Retained Earnings Deficit Rises to Negative N38.43bn on Mounting Losses

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Notore chemicals, a maker of Fertilizer products reported another loss for the six months period that ended in March 2021, which further pushed retained earnings deeper into the negative territory at –N38.43 billion.

A retained earnings deficit, also called an accumulated deficit, happens when cumulative losses are greater than cumulative profits causing the account to have a negative or debit balance.

In the six months to 31st March, 2021 the firm reported a loss of N9.272 billion as cost of sales (N9.675 billion) and finance costs (N8.44 billion) completely swallowed revenues.

Notore sold N5.25 billion worth of products in the period, with Urea and other chemicals making up N3.39 billion or 65 percent of the total amount.

Ammonia and NPK sales made up the rest.

Impact of Accumulated Deficit on Notore

Running an accumulated deficit can have several effects. One guaranteed result is that the total equity is smaller.

Notore’s total equity fell to N53.82 billion in the latest March 2021 period from N63 billion in September 2020.

Shareholders may not take this well.

Anyone looking to invest in Notore or loan the company money will want to know why they have an accumulated deficit.

Was it one bad year? Have they been running a deficit for several years? If it is a struggling startup, it might be understandable.

However, it is more alarming when an established company like Notore that’s had years to accumulate earnings shows a retained earnings deficit.

The accumulated retained earnings deficit is a sign of serious financial problems and potential bankruptcy.

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