Guysuco set to report $3B plus loss
-one-time accounting charge
Stabroek News
June 18, 2004
Guysuco is set to report a loss in the region of $3.3B for 2003 most of it due to a one-time charge required under a new accounting standard.
The final accounts should be ready by next week and made public in July.
The $3.3B loss follows a loss of $300M in 2002 and $1.2B in 2001 but once the accounting charge is stripped out Guysuco would have made a marginal loss for the year and 2004 promises to be much improved.
While the company is said to have made an operating profit on turnover of $26B it incurred a charge of roughly $3B under a new international accounting rule that requires them to count cane standing in the field.
This standing cane valuation which falls under the International Accounting Standard 41 looks to match costs incurred in the previous year with revenue received in the following.
In the case of Guysuco, a certain amount of cane planted and maintained in 2002 was not turned into sugar and sold until 2003. As such the company was required to value all the cane left in the field at the end of 2002. This valuation was based on the price it pays for cane from private farmers.
At a meeting in December 2000, the IASC Board approved a final Standard, IAS 41 which establishes standards of accounting for agricultural activity. This was to come in effect by January 1, 2003. A Deloitte and Touche summary of the standard states that "Agricultural produce should be measured at fair value less estimated point-of-sale costs at the point of harvest. Because harvested produce is a marketable commodity, there is no 'measurement reliability' exception for produce... A change in accounting policy to adopt IAS 41 may be accounted for in accordance with either of the treatments for changes in accounting policies allowed in IAS 8, Net Profit or Loss for the Period, Fundamental Errors and Changes in Accounting Policies. [IAS 41.58] The choices are: the benchmark treatment: restatement; or the allowed alternative treatment: cumulative effect in earnings in the period of change, with pro forma disclosures as if restated."
Guysuco was also required to set aside $1.5B for the pension scheme as part of provisions for liability under accounting standards. This is an annual requirement.
The crop for 2003 was down from the previous year missing its target of 330,000 MT by 28,000 MT. while prices were only marginally improved.
A team from Guyusco was recently in China for final talks on the Skeldon Modernisation Project with the aim of signing the final construction contract by the end of the month.
To date Guysuco has spent US$8M of its own resources on the US$110M project and is expected to come up with US$27M over the 3-year period and another US$20M from land sales.
A source close to the company described the loss as "not the end of the world" and predicted that 2004 would be far better in part from the stronger euro.
As late as October 2003, outgoing Chairman Vic Oditt said the next two years would be very profitable for Guysuco, as it had entered into a hedging programme that would ensure higher prices for its sugar.