East African Cables has been declared insolvent by KPMG with current liabilities exceeding current assets by Sh426 million.
According to the report, it owes several banks money running into billions and has been struggling with declining sales since 2013.
The company’s books show that it has overdue loans amounting to close to Sh3.5 billion by end of last year.
“A material uncertainty exists that may cast significant doubt on East African Cables Plc’s ability to continue as a going concern,” says KPMG.
East African Cables Woes
The cables manufacturer has put up most of its assets such as land and buildings as security for the loans.
This is further a demonstration of the extent of the financial hole the company is in, according to The Star.
On Friday, the listed firm announced a Sh753 million loss for the delayed financial results for the year ended December 31, 2020.
This is a drop from a Sh631 million profit in 2019.
The loss was attributed to a near wipeout of other income.
This shrunk to just Sh7.5 million from a greater Sh.1.5 billion the previous year.
The firm also posted a pre-tax profit loss of Sh555.1 million during the year under review compared to a profit of Sh658.7 million in 2019.
EA Cables’ primary business nevertheless remained resilient amidst the pandemic.
It had revenues up 14 percent to Sh1.8 billion after leveraging new distribution channels.
Suspension at NSE
Last year, the firm was moreover suspended from trading at the Nairobi Securities Exchange (NSE) over talk of possible liquidation.
Mauritius-headquartered SBM Bank had filed a petition to liquidate East African Cables.
This is after the company defaulted on an Sh285 million loan.
Other creditors include Equity Bank which offered the manufacturer Sh1.6 billion to restructure loans.
These loans were previously held by Standard Chartered Bank Kenya Ltd and Standard Chartered Bank Tanzania.