Overwhelmed by debt and tax, CC is in danger of going concern, unless…!

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Its financial statements show negative equity of 37,863,454 TD, including the loss for the year of 75,986,092 TND. It’s the Carthage Cement company. These revenues almost doubled, from 172.929 MD at the end of 2017 to 238.225 MD at the end of 2018. The company is therefore working well.

However, this good productive health remains overwhelmed by operating expenses, which rose from 199.570 MD to 262.884 MD from one year (2017) to another (2018).

These figures indicate that the company that the State and El Karama still cannot sell was already in deficit from the start, although this deficit has fallen by some 4 MD.

Even more overwhelmed by financial charges (65 MD last year after the 49 MD of 2017), Carthage Cement’s losses increase by 7 MD from one balance sheet (2017) to another (2018).

Tax audits and adjustments that are never-ending

It should be recalled that the company, which was supposed to be a jewel of the cement industry in Tunisia, would almost be the subject of a plot.

From 2011, it is the Tax Department that is coming down on it. Indeed, “a tax audit covering the period from October 22, 2008 to December 31, 2010, which mainly resulted in a tax of 16,368,135 TND, including 3,026,071 TND in penalties and 4,094,561 TND in excess of corporation tax”.

Following a partial arrangement concluded with the tax authorities in July 2012, the company signed an acknowledgement of debt for an amount of 6,483,309 TND, including 1,381,793 TND in penalties.

But the Tax Department had not yet finished with this company, which had been partially confiscated from Belhassen Trabelsi, who was not the sole owner.

From August 2012, Carthage Cement receives an automatic tax order having the effect of “claiming from the company an additional tax of 7,228,764 TND including 780,420 TND of penalties and 3,960,618 TND of excess corporation tax”.

The company may have challenged this taxation and brought the case before the court of first instance. The case is heard at first instance and on appeal in favor of the tax authorities. The company brought the case before the Court of Cassation and did not note the impact of these judgments in its books.

The tax plot does not stop there. “A tax audit covering the period from January 1, 2011 to December 3, 12012 resulted in a tax of 3,152,700 TND, including 334,916 TND in penalties”.

And again, the company made a partial arrangement in December 2017. Nevertheless, the company receives a new tax notification for a residual amount of 619,552 TD which it has challenged in court.

However, the tax authorities have not yet said their last word and are now going into detail.

A new tax audit, covering taxes, this time of the company “Les Grandes Carrières du Nord” (split in October 2008 into two companies, Carthage Cement SA and Les Grandes Carrières du Nord Trade) covering the period from January 1 to December 31, 2008.

Carthage Cement, had already, as early as October 2010, received a notice of adjustment claiming additional taxes of 916,323 TND, including 299,478 TND in penalties.

The company has expressed its opposition to the results of the audit. In July 2013, the same Carthage Cement received an automatic tax order requesting the company to pay additional taxes of 647,711 TD, including 227,418 TD in penalties.

The company takes the case to the court of first instance, and the case is again decided in first instance in favor of the tax authorities.

It should be noted that in a correspondence between the tax authorities and the Court of Appeal of December 28, 2016, the amount of the tax was reduced to 171,998 TND, including 77,486 TND in penalties.

And again the State, despite its ownership (the State has 41.6% of CC’s capital, including 35 pc indirectly through holding companies) and which is unable to sell its shares because of the company’s financial situation, is attacking Carthage Cement.

A social audit covering the financial years 2015 to 2017, the results of which were notified to the company in June 2018 and that showed an adjustment of 2,892,327 TND.

The Company has expressed its opposition to the results of this audit. But let us bet that the CNSS will still win despite everything.

Auditors talk about significant uncertainty about going concern… unless!

In their latest report, the auditors drew attention to “the cash flow and operating difficulties encountered by the company.

As a result, the company was unable to honor all its commitments to financial institutions and other third parties, including tax authorities and social security.

The same auditors state that “the company’s shareholders’ equity as at December 31, 2018 became negative, due to cumulative losses of 320,686,427 TND as at December 31, 2018”.

This uncertainty could be resolved if the rescue plan, developed last October, were quickly put in place.

“The company’s management has confirmed that it has obtained agreements in principle with certain financial institutions to reschedule bank debts as part of the company’s financial restructuring plan,” the Statutory Auditors said.

It further explained that “the company’s management has drawn up a business plan for the period 2019-2023 and on which it believes that the company would be able to honor its commitments.

It should be noted that, given the high level of its debt, the company’s ability to honor its commitments remains dependent on the achievement of the expected performance of the business plan, as well as on the implementation of the proposed financial restructuring plan.

Who can hear Carthage Cement’s warning call?

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