Auditors warn investors as Chellarams Plc posts N3.7bn loss

Auditors of Chellarams Plc have warned investors over the dwindling  fortunes of the company, saying the continued existence of the company is doubtful in view of the N3.7 billion loss and  negative shareholders’ funds of N6.81 billion recorded as well as the  withdrawal of financial support by banks in  the financial year ended March 2021.

The warning was contained in a Qualified Opinion issued by the audit firm, BDO Professional Services Chartered Accountants, on Chellarams financial statement for the year ended March 31st 2021 released to the Nigeria Stock Exchange (NGX).

Auditors issue Qualified Opinion when they are not  confident about any specific process or transaction that prevents them from issuing an unqualified, or clean, report on the financial statement of a company. 

Founded in 1923, Chellarams Plc is a fully integrated Sales and Marketing Organisation with Pan-Nigeria coverage through an extensive branch network and distributor base.

The Company’s trading operations are focused on distribution of polyurethane, industrial chemicals, raw materials and also providing warehousing and logistics services. Three subsidiary Companies and five associated Companies further comprise the Group’s operations.

Led by Asiwaju Dr. Solomon K. Onafowokan as Chairman and Aditya Chellaram as Chief Executive Officer, Chellarams recorded another year of dismal performance, as revenue fell by 46% to N1.39 billion  resulting to N3.7 billion loss in the financial year ended March 2021.

This development among others prompted the auditors of the company to warn that the company may be unable to continue as a going concerns.

Auditors Cite Material Uncertainty

In their report to the shareholders of Chellarams Plc and its subsidiaries, the auditors stated: “. Furthermore, we also wish to draw attention to the existence of the following conditions as at year end: 

Explaining the reason for the continued decline in the company’s fortunes, Chellarams Chief Executive Officer, Aditya Chellaram, said:

“The recent year was a pivotal and challenging one for us all though our Government did take considered action to reduce the impact of Covid-19 and we see a good number of our customers returning to pre-pandemic levels. 

“However, we did have other challenges to face, including a new policy from the Central Bank of Nigeria that prohibits us from importing dairy products and, as such, we have suspended all operations of our subsidiary Chellarams DMK Ltd.”

Highlighting measures to reverse the dwindling fortunes of the company, the CEO said: “To mitigate further losses, we have taken significant steps to increase our rental income and reduce our overhead and expenses. We have shut down our branches and only operate out of our Lagos hub. 

“A large number of our staff supported us and either took pay-cuts or worked part-time and we could not have made it through this period until now without their loyalty and support. 

“Our subsidiaries Dynamic Industries Limited and United Technical & Allied Services Limited have both seen a growth in demand from their industrial customers. Dynamic Industries has also positively diversified into chemicals sales and this reflects our group strategy to represent strong international companies for speciality products that retain customer’s loyalty and command healthy margins. 

“Devyani International Nigeria Limited has performed well during and after lockdown with a significant increase of takeaway business for its KFC restaurants and had put in place plans to open a new store in Port Harcourt. 

“We believe that our investment in this business is secure. Conditions for the year ahead are improving, though not perfect. We are putting all of our efforts into increasing our turnover, reducing our liabilities and keeping our expenses under control. We thank you for your support during this difficult time.”