Update on Axis Inc

Blogged on Friday, A Deeper Look At Axis Inc

Yesterday, Business Times carried an article on Axis, Axis may write off RM161m in 2008 accounts

• The garment and textile maker told Bursa that it may write off the money owed by suppliers to the company in its 2008 accounts as it may not be recoverable
  
  GARMENT and textile maker Axis Inc Bhd may have to write off RM161 million in its 2008 accounts as its auditor could not find enough evidence to show that the company could recover the amount.
  
  The money is owed to the company by its contract manufacturers and other suppliers, the company said in a statement to Bursa Malaysia on July 31.
  
  Axis was responding to Bursa Malaysia's instruction to explain accounting issues that have delayed the submission of its 2008 audited accounts.
  
  The company said its external auditor, Messrs Horwath, was not able to obtain sufficient evidence and explanation to verify three issues.
  
  One is an amount of RM105 million due from contract manufacturers, which is part of other receivables as at March 31 2008.
  
  This is a big jump from RM11 million in the previous financial year. Subsequent to the balance sheet date, RM20 million has been settled by the contract manufacturers.
  
  Secondly, the contract manufacturers also owed the group RM28 million for sales of fabrics by the group to the contract manufacturers.
  
  Finally, prepayments of RM32 million were made to certain suppliers for the supply of embroidery services, purchase of fabrics and accessories, from which only RM11 million of these services and goods were received by the group.
  
  The balance (of goods and services) is expected to be settled by the end of September 2008.
  
  The contract manufacturers are LA (Cambodia) Garment Pte Ltd, Vivatino Design (Cambodia) Pte Ltd and United Garment (Vietnam) Co Ltd.
  
  These manufacturers are in a strategic alliance agreement with a subsidiary of Axis, where the manufacturers receive a 25 per cent advance payment of the value of a confirmed order for the cutting and sewing of the garments.
  
  Since Messrs Horwath was unable to form an audit opinion, Axis intends to carry out a special audit. It told Bursa Malaysia on Thursday that the company can only say how long it needs to settle the audit issues once the board appoints an independent auditor for the special audit.
  
  No further details on the special audit were provided.
  
  Trading in Axis shares, which was suspended on Thursday, resumed at 2.30pm yesterday but the stock fell by four sen to 31 sen.
  

May write off as such as rm 161 million!

Holy cow!

This is utterly shambolic!

And this reminded me of the comments made earlier by elizabeth, who said...

• Other receivables also have gone up alot. These apparently were advances paid to suppliers (for raw mat) and contractors in order to secure stocks at lower prices.... Considering this amount is more than the SH equity, it's pretty scarry...

Let's see how scary. Look at the most recent quarterly earnings: Quarterly rpt on consolidated results for the financial period ended 31/3/2008

Well if Axis were to write off some 161 million from the above, can you imagine the damage??

How?