Shareholders may pull the plug on Jordan's Rum-Aladdin for Engineering Industries

AMMAN — Rum-Aladdin for Engineering Industries seems to be going down the voluntary liquidation road when shareholders hold an extraordinary general assembly meeting next week, or later, if postponed.

Chairman Mohammed Taha Harahsheh told the Jordan Securities Commission in a disclosure that an extraordinary general assembly meeting on October 18 will discuss taking the company into voluntary liquidation.

A public shareholding company founded in 1993, the company manufactures, assembles and trades electrical and electronic home appliances, such as air conditioning units, gas cookers, heaters, metal furniture, radiators, washing machines, steel and aluminum ladders.   

Earlier this year, the shareholders agreed to restructure the company's capital and received the approval of the minister of industry and trade to this effect.

The restructuring entailed lowering the JD10 million registered capital to the JD7.2 million paid up capital and then down to JD3 million to write off JD4.2 million of losses that, at the end of 2013, accumulated to JD4.8 million.

The next step, as stipulated in the minister's approval, would be to increase the capital by JD7 million in order to provide the company with liquidity from strategic shareholders and/or  to capitalise the amounts payable to creditors by converting them into shares.

The price per share in this course of action should not be less than JD0.750, meaning that the capital would rise by JD7 million to JD10 million at a JD0.250 discount per share, the minister wrote in March 2015 noting that legal requirements were not fulfilled until March 29, 2015.

On April 26, another extraordinary general assembly meeting was held and shareholders amended the price per share from JD0.75 to JD0.5.

Even so, the consolidated interim financial statements and the auditor's review covering the six months ended June 30, 2015 showed accumulated losses at JD5.3 million, paid up capital at JD7.2 million and JD1.9 million as payments into account to increase capital.  

Current liabilities totaled JD7.5 million, of which JD3.4 million were short-term loans, JD2.4 million were amounts due to creditors and JD1.4 million were overdue expenses and other payables.

The auditor mentioned in the review that the company did not provide confirmations from banks regarding account balances and amounts outstanding of all related loans. 

It said that Rum-Aladdin for Engineering Industries did not record during the period all interests due on loans extended by local banks, because the company did not receive any account statements from them.

The auditor also could not verify the worth of inventory in the warehouses, noting that it, therefore, was unable to determine if there should have been any impairment in the value.

According to the balance sheet as of June 30, 2015, the inventory amounted to JD4.3 million (mostly raw materials) out of JD5.7 million in total current assets. JD1million were receivables after taking impairments into account.

Property and equipment, totaled JD6.6 million.

"The company's land and everything built on it are hypothecated in favour of the banks, the Income and Sales Tax Department, and the Social Security Corporation," the auditor wrote in the notes accompanying the 2014 financial statements.

It added: "The vehicles are held under lien in security for suits filed against the company."       

The auditor noted that JD1.3 million, an amount owed as interest by Middle East Complex for Engineering and Electronics and Heavy Industries, was reversed and a confirmation of the receivable balance after deducting the interest was not obtained.

The income statement revealed a sharp decline in sales from JD0.5 million during the first six months of last year to JD0.1 million during the January-June period of 2015.

This drop translated into a JD0.3 million loss when all costs were taken into consideration compared to a JD0.6 million loss during the first six months of last year.

The troubles of the Rum-Aladdin for Engineering Industries appear to lie in operational losses as the cost of production in 2014 amounted to JD1.3 million, only to generate JD0.7 million of sales.

Similarly, in 2013 the cost of production was JD0.7 million while sales amounted only to JD0.4 million.

Such operational deficit resulted in a JD0.9 million loss last year. In 2013, the financial performance was positive with a JD0.6 million profit that was achieved on the back of JD1.2 million gained from selling property and equipment.

The 2014 annual report showed capital investment at about JD265 and market share at around 35 per cent, mentioning as well that the Saudi and Iraqi markets account for 57 per cent of overall sales.

The report acclaimed marketing and technological achievements, stressing capabilities and drive towards higher efficiency, operational competence, competitiveness and investment growth.     

At the end of last year, 33 employees worked at the head office and factory of Rum-Aladdin for Engineering Industries in Amman's Sahab neighbourhood.

Salim Abdul Rahman Hassan Hamdan, Talal Ibrahim Mohammed Al Awadi, Taha Harahsheh and Fuad Khamis Abdul Rahman Al Jamal were the major shareholders in the company at the end of last year.