First National Vegetable Oil Industries Company lands up needing overhaul

AMMAN — Three shareholders, out of 357 investors, decided this month to overhaul First National Vegetable Oil Industries Company (FNVO). 

During an extraordinary general assembly meeting, the shareholders who own a 69.9 per cent stake in the company authorised the board of directors to restructure FNVO administratively and legally and to prepare a future plan to restart operations and address losses .

They also asked the board to present recommendations and proposals for financial restructuring, in order to provide a basis for a settlement with the Capital
Bank of Jordan.

An earlier disclosure to the Jordan Securities Commission, besides the general assembly's minutes of the meeting, showed FNVO's  financial position as of December 31, 2013, the latest year when the accounts were audited.    

Jordan Audit House listed 11 qualified opinions on the financial statements, detailing irregularities in the computation and presentation of receivables, property and equipment, inventory, losses, customs and taxes, loans, and lawsuits.

"We did not detect any effort by the management in following up on the  receivables which have been static for a long time," the auditor wrote in the report, noting that no legal action was initiated on many of them and that no impairment provision was taken this year (2014). 

Without any direct substantiation of  receivable balances, "it seems that JD0.8 million cannot be recovered and, subsequently, the losses will be higher and the shareholders' equity will be lower".

The auditor pointed to miscalculation of depreciation and underlined the absence of data control records for all property, equipment and machinery as an important negative element.

Jordan Audit House listed several assets that were sold, based on a board of directors decision, noting that the company did not provide details about the sales and did not submit any assurances to the contrary.

"Selling assets impounded by executive court decisions can be considered as damages to the company, shareholders and creditors," the auditor said. 

It went even further to accuse FNVO of presenting deceiving financial statements and concealing fundamental information related to two plots of lands that were expropriated and transferred to the ownership of Capital Bank of Jordan.

In the report, the auditor also mentioned misconduct because the company kept raw oil in tanks for a long time, did not process it within the right time and did not indicate its purchase and expiry dates.

It said an impairment provision for the total volume of raw material would increase losses and lower inventory.

Jordan Audit House remarked that because of  management changes at FNVO, it was unable to obtain a suitable letter of undertaking regarding the financial statements.

According to the auditor, the company faces mandatory liquidation as its accumulated losses reached JD3.7 million, or 82 per cent of the company's capital.

With a number of necessary modifications, such as provisions related to receivables and inventory among others, accumulated losses should become JD4.5 million.

The auditor concluded that the company cannot be considered as an ongoing concern noting that it was not informed about the negotiations with any of the banks on  financing matters, or about the executive work plan to address the losses.

Stressing the management's incapability, the auditor mentioned that the board of directors lacked interest and seriousness in revitalising the company. 

The report also includes considerable technical data related to customs and taxes besides detailed correspondence that show several inconsistencies, disputes and conflicts.