Davomas' Business Sustainability Doubted

The business sustainability of PT Davomas Abadi Tbk and its subsidiary is doubted by the auditor due to their huge capital deficiency and accumulated deficit.
In Davomas' financial statement announced at the information transparency to the Indonesia Stock Exchange (BEI) yesterday, Tanubrata & Associates Public Accounting Office revealed Davomas' accumulated deficit and capital deficiency reached IDR785.86 billion and IDR163.66 billion, respectively, leading to substantial doubts about the company's business sustainability.
Such a condition makes the company unable to service their due liabilities in May 2009. Davomas is unable to service a bond coupon of US$13.09 million or IDR136.14 billion on slumping cash flow and financial performance. The coupon bond matured on May 8.
Davomas is a company processing chocolate ore into fatty cocoa and cocoa powder. The global economic crisis has lowered demand from Europe and America for the company's products.
In addition, the rupiah depreciation against the US dollar led to a total exchange rate spread loss of IDR122.03 billion in the first quarter of this year. In the first quarter of 2008, the company was able to record an exchange rate spread profit of IDR31.85 billion.
Currently, Davomas has appointed ING Bank NV financial advisor, Sidley Austin & Skadden Arps international legal consultant, and Hadiputranto, Hadinoto & partners Indonesian legal consultant.
In early June, several majority bondholders met with the management of Davomas and reviewed the conditions of the company's underlying assets.
The requirements for restructuring are scheduled to be completed in August this year.
Since May this year, the management of Davomas has temporarily suspended its production activities until the specified time.
In the first quarter, Davomas recorded IDR349.72 billion in sales, down from IDR820.6 billion in the first quarter of 2008. Davomas share was last traded on May 11 at IDR73 per share.