Ayka Addis Sees Ray of Hope from DBE




Ayka Addis Textile & Investment Group, which has seen massive losses for the past four years, has got support from the Development Bank of Ethiopia (DBE) board of directors.

DBE’s board has directed the management of the bank to assist in granting it a pre-shipment credit. The company owed the Bank 2.3 billion Br for the loan it has extended to Ayka in the form of project financing and working capital credit. The Bank’s management took a strict stand against the company citing its outstanding loan, repayment history and loan portfolio.

As the company is under stress, the Bank is extending assistance, according to Shiferaw Shigute, the board chairperson of the Bank and minister of Agriculture & Livestock. But he strongly argues that the Banks is not considering an option in pledging additional working capital to the company.

“The Bank is extending minor supports such as covering its export expenses,” Shiferaw told Fortune.

“The last time we got a pre-shipment credit was in February,” claims Yusuf Aydeniz president of Ayka Addis, that took 160 million Br then and expects to get an additional pre-shipment credit of 200 million Br, pre-export finance to enable the exporter to procure raw materials and carry out manufacturing processes.

Becoming operational after constructing a state-of-art manufacturing plant in 2010 with a total investment of 240 million dollars at Alemgena, 20Km west of Addis Abeba, the company could only manage to declare successful results for the first two years. Being the largest textile company, it is one of the companies which produce garment end to end starting form spinning, knitting, dyeing, printing, embroidering and packaging. It exports its products to Germany, Spain, the United States, Japan, France and Canada. Since becoming operational, it has generated 400 million dollars from export.

However, the company has been declaring losses for the past four years. It lost 615 million Br and 312.8 million Br in 2014 and 2015, respectively. It also had accumulated losses of 1.9 billion Br while having a paid-up capital of 678.9 million Br as of December 2015.

Based on its financial statement, experts define the company as one which should have dissolved years ago. Financial statement analysts also anticipate the company has a very slim chance to turn its massive loss around as it consumed more than three-quarters of its capital. Higher production costs, sales, distribution, administration and financing costs are the major reasons which pushed the company to losees. The president of Ayka claims that they are in the red for 50 million euros since 2013.

Recurrent power outage during 2013 and the following year and political unrest which outbroke in 2016 are the major reasons that led the company to losses, according to Yusuf, whose company currently operates with 6,500 employees.

The financial crises at the company would not continue after June, according to Yusuf, who explains that the country is in better stability and he is getting financial aids from foreign companies.

“We already got a five million euros credit from our clients in Germany, and we are now importing organic cotton,” he said. “Besides, we recently received an order amounting to seven million euros.”

The Sister company of Ayka Addis, Ayka Istanbul recently partnered with the government of Burkina Faso to construct an integrated cotton processing plant in Ouagadougou, with an estimated investment of 200 million dollars. Ayka Istanbul will have a 55pc stake in the venture, while the government of Burkina Faso will own the remaining. Four banks have already shown a willingness to finance the project.

The Banks decision in assisting the company is a costly measure from the financial point of view, according to Abdulmenan Mohammed, a financial expert with one and a half decade of experience.

“How long DBE supplies funds to a legally bankrupt and underforming entity?” He said. “Ayka needs a strategy that makes it profitable, which will enable it to recover from losing and settle its existing loan.”



By FASIKA TADESSE
FORTUNE STAFF WRITER

Published on Jun 02,2018 [ Vol 19 ,No 944]


SHARE :
               


Editorial

It is typical of incumbents to doggedly defend their economic policies...


Agenda

The Ethiopian Revenues & Customs Authority failed 29 billion Br short o...


Fineline

The speed at which Abiy Ahmed (PhD), chairman of th...


Commentary

The Central Committee of the ruling EPRDF has made the first move, exte...


Viewpoint

The ‘No war-No peace’ situation between Ethiopia and Eritrea –...


Opinion

The rate of change in Ethiopia is disorienting. It was just two weeks a...


View From Arada

There is a cost to a statist approach to economic development. It is no...


Editors Pick
















MEMBERS' LOGIN


ADVERTISEMENT

ADVERTISEMENT

 

SUBSCRIBE TO ADDISFORTUNE


//