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Auditors have raised serious concerns over the ability of Global Heavy Chemicals and Metro Spinning to continue operations, citing weak balance sheets, rising losses and questionable accounting practices in their FY25 financial statements.

The audit opinions, published by the Dhaka Stock Exchange on Tuesday, warned investors that the financial conditions of both companies pose material risks to their going-concern status.

Global Heavy Chemicals

The auditor said Global Heavy Chemicals is facing an acute liquidity crunch, with just Tk 1 in current assets against Tk 8.14 in current liabilities. The company is unable to cover Tk 1.38 billion in liabilities due within a year with only Tk 0.17 billion in current assets, a mismatch that could disrupt its supply chain.

The auditor also highlighted a sharp deterioration in operating performance. Sales fell 58 per cent in FY25, while selling and distribution expenses rose 16 per cent over the same period.

“Such substantial increases in selling expenses, particularly during a period of declining net sales, raise concerns regarding the appropriateness, necessity and authorisation of these expenditures,” the auditor said.

Further concerns were raised over the company’s operational decisions. Global Heavy Chemicals temporarily shut down production without clear justification and later resumed operations at a much lower scale, which the auditor described as risky.

The audit also questioned asset quality, noting that the company revalued fixed assets multiple times without recognising impairment losses, thereby weakening the reliability of its balance sheet.

Metro Spinning

Metro Spinning’s auditor warned that the company’s continued losses have eroded its financial base, pushing retained earnings to a negative Tk 583.70 million.

“These events or conditions indicate that a material uncertainty exists that may cast significant doubt on the company’s ability to continue as a going concern,” the auditor said, adding that the financial statements failed to adequately disclose the risk.

The auditor also pointed out that Metro Spinning did not charge any depreciation in FY25, undermining asset quality. “Depreciation does not cease when an asset becomes idle or is retired from active use unless the asset is fully depreciated,” the audit report noted.

Concerns were also raised about the quality of trade receivables, as many balances were long overdue without any provision for bad debts. In addition, a shortfall was found in the dividend account, prompting questions over the handling of unclaimed dividend funds.

The auditor further noted that the company collected taxes from customers on behalf of the government but failed to deposit the amounts to the exchequer, describing the lapse as a clear violation.