The auditors of Kolosus Holdings, the leather and meat company, have cautioned shareholders that the company’s future is uncertain, despite the group reversing a R130 million ($12.02 million) loss and posting a small profit of R7.5 million ($700,000) in the year to April. The group provide leather for the automotive industry in South Africa and Europe, manufacture footwear and supply fresh and canned meat products.
In their audited financial statements, the chairman stated: ‘Traditional trading in the first quarter of the year is difficult and the new year willnot be different. However, the group should perform, on an annual basis, better than in the past year.’ The group’s expectations are that they will do better in 2003 than in 2002..
Auditors Price WaterhouseCoopers stated: ‘Unexpected economic conditions subsequent to the year-end, including weaker consumer spending and general demand, resulted in price and volume reductions that adversely affected the company’s expected performance in the first quarter of the new financial year. The group is mainly financed by short-term borrowing and is, therefore, dependent on the continued support of financiers. Because of these factors, a risk exists that the group may not be able to continue as a going concern.’
The other issue hanging over the group is a claim against a Kolosus subsidiary Silveroak by US automotive leather supplier Seton, which has now risen to an estimated R126 million ($11.6 million) from R80 million ($7.4 million) due to interest and the rand’s depreciation. No provision was made for this in the financial results as it was not possible to determine the outcome of the legal action, the auditors said.
When Silveroak exercised an option to buy Seton’s stake in a joint venture, the US group took the matter to the international court of arbitration, alleging they could have received a better price. The court ordered Silveroak to pay $10 million ($924,598).
