Dubai-based Gulf Navigation Holding seems to be facing uncertainty after including a multi-million-dollar  insurance claim, the outcome of which is not certain, in its latest financial results.

The shipping company had earlier seen the loss of its live animal transport vessel Gulf Livestock 1, which sunk off Japan with some cattle and dozens of crew during a typhoon in September.

In its Q3 2020 results, the company mentioned that it has an insurance claim receivable worth 197.5 million UAE dirhams ( $53.8 million) related to the accident.

However, a Deloitte report on the review of interim financial information, which was filed to the Dubai Financial Market (DFM) on Sunday, pointed out that if the claim had not been included as a receivable, the company’s accumulated losses would have exceeded 50 percent of the group’s share capital, thus requiring a general meeting for shareholders to vote on dissolving or restructuring the company.

“Based on information provided to us by management, [the] management has recognised a receivable of AED 197.5 million in respect of an insurance claim, which is not virtually certain to be recoverable, that we believe should not be recognised to conform with International Financial Reporting Standards (“IFRSs”),” the report said.

“The timing and realisation of a number of key assumptions such as recoverability of insurance claim and sale of vessel within the forecasts are not wholly within management’s control,”  the report noted, adding that a material uncertainty exists that may cast significant doubt on the group’s ability to continue as a going concern.

Losses

Results for the third quarter showed that the group incurred a loss of 63.2 million dirhams ($17.2 million) during the first nine months of 2020, compared with a loss of 46.3 million dirhams ($12.6 million) in 2019.

Current liabilities exceeded current assets by 123 million dirhams ($33.4 million), with accumulated losses of 507.8 million dirhams ($138.3 million).

In a detailed analysis of losses, posted along with its results, Gulf Navigation said accumulated losses to the capital ratio were 49.8 percent.

Gulf Livestock 1 sank in the early hours of September 2, resulting in the loss of 6,000 cattle. Two crew members were rescued by the Japanese coast guard, and the body of the third was pulled from the sea, while 40 more are still missing.

The ship was on its way to China from New Zealand, carrying cattle for the Chinese dairy farming and breeding programme, when the typhoon struck.

The company announced the appointment of a new board four days after the incident.

(Reporting by Imogen Lillywhite; editing by Cleofe Maceda)

Imogen.lillywhite@refinitiv.com 

Disclaimer: This article is provided for informational purposes only. The content does not provide tax, legal or investment advice or opinion regarding the suitability, value or profitability of any particular security, portfolio or investment strategy. Read our full disclaimer policy here.

© ZAWYA 2020