CIC Chemanex restate 1Q 2009 financial statements

Ravi LADDUWAHETTY

Chemical Industries (Colombo) PLC and subsidiary Chemanex PLC last week restated their 2009 first quarter financial results due to the original results being inaccurate.

This follows the Capital Gains of Rs. 98 million which Chemanex received from the sale of the Rs. 36.7% stake it had in Commercial Leasing PLC as Rs. 470 million, which the company said, was due to the adoption of the incorrect accounting procedure.

However, market analysts said that the appropriate deductions had not been made which resulted in the blunder and which had a spill over effect on the parent company- CIC when it came to the consolidation of the financial statements also for the first quarter of 2009.

When contacted by Daily News Business, CIC Director and Chemanex Managing Director Prithi Jayawardena said that the company had reported the financial results according to the manner in which it felt right until some shareholders pointed out the error.

Chemanex General Manager ( Finance) Amila Sugathapala said the company had not adopted Sri Lanka Accounting Standard No 27 which specifies “Investments on Associates” where they had to restate the consolidated figures.

Chemanex in turn had consulted Auditors-KPMG Ford Rhodes Thornton which advised them to adopt the SLAS 27 where there was the dip in the Capital Gains from the sale of the 36.7% Commercial Leasing stake, Sugathapala said. He said the new and corrected financial statements were in print and they would be released to shareholders this week. The company had also kept the Colombo Stock Exchange informed accordingly.

Market analysts described this as a blunder of epic proportions where the market and the shareholders were misled. Investors who bought the CIC and Chemanex were led to believe that there was a Capital Gains of Rs. 470 million where it was Rs. 98 million which impacted the share price and their investments in both Chemanex and CIC, being the parent company.

This is a case of not knowing simple accounting and arithmetic, they quipped.