SsangYong Motor’s plant in Pyeongtaek, about 70 kilometers south of Seoul. (Yonhap)
SEOUL, May 18 (Korea Bizwire) — The auditor of SsangYong Motor Co. recently refused to deliver an opinion on the carmaker’s ability to run normally as a company after it posted a sharply widened net loss in the first quarter, SsangYong Motor said Monday.
In the company’s first-quarter earnings report to the financial regulator, KPMG Samjong Accounting Corp. was skeptical about SsangYong’s ability to continue as a going concern, as it continued to post hefty net losses for the 13th consecutive quarter through the first quarter.
KPMG’s refusal comes as SsangYong’s current debts exceeded current assets by 576.7 billion won in the first quarter.
The news sent shares in SsangYong Motor 11 percent lower to close at 1,310 won, underperforming the broader KOSPI’s 0.51 percent gain.
From January to March, SsangYong’s net losses deepened to 193.54 billion won (US$157 million) from 26.12 billion won in the year-ago period as the coronavirus outbreak affected production and sales.
SsangYong said the process of delisting a company begins when an accounting firm delivers no opinion on the company’s annual earnings results.
There are four different types of auditor’s opinions: an unqualified opinion audit, which is also known as a clean opinion; a qualified audit; an adverse opinion, which is the most unfavorable opinion a business may receive; and a disclaimer of opinion, which means no opinion over financial results.
If Samjong gives no opinion over SsangYong’s annual financial statements for the year, the company can appeal the decision within a week and will be given one year during which it is required to improve its financial health.
SsangYong could be delisted if its accountant again refuses to offer an opinion on the company’s annual performance for the following year after the one-year period.
The South Korean unit of Indian carmaker Mahindra & Mahindra Ltd. has struggled with declining sales due to a lack of new models and the parent firm’s recent decision not to inject fresh capital into the Korean unit.
Mahindra said early this year it will inject 230 billion won into SsangYong for the following three years after obtaining approval from its board.
But Mahindra’s board voted against the investment plan last month as the spreading COVID-19 outbreak continues to affect vehicle sales in global markets.
Instead of the proposed 230 billion won, Mahindra said it would consider a “special one-time infusion” of up to 40 billion won over the next three months to help SsangYong continue operations.
But analysts said the special infusion could be just a quick-fix solution for the cash-strapped carmaker. They said the fate of SsangYong hangs in the balance should there not be a rebound in vehicle sales.
From January to April, SsangYong’s vehicle sales fell 33 percent to 30,952 units from 45,908 in the year-ago period.
SsangYong’s lineup consists of the flagship G4 Rexton sport utility vehicle, as well as the Tivoli, Korando and Rexton Sports SUVs.
In 2011, Mahindra & Mahindra acquired a 70 percent stake in SsangYong Motor for 523 billion won. Mahindra currently owns a 74.65 percent stake in the SUV-focused carmaker.
(Yonhap)
