Abdullah A. M. Al-Khodari Sons Company said that its accumulated losses as of Feb. 12, 2019 widened to SAR 1.11 billion representing 198.52 percent of capital.
The extended losses were incurred as several projects have been officially suspended for various periods of up to two years. Accordingly, most of the work equipment has been withdrawn. These projects require the mobilization of the company's resources, subcontractors and suppliers, which has led to the following consequences for direct and indirect costs, the company said in a bourse statement.
The increase in the cost of skilled and unskilled workers as the price of work permits has been tripled since the cessation of work on these projects.
The cost of transferring assets from business sites during the stopover period and returning them to these sites to resume work.
Some subcontractors and suppliers, who have already been contracted with, are not still in business, or unable to continue to implement the scope of the contracted work without substantially altering the terms of payment. A number of subcontractors and suppliers had previously agreed to participate in the IPO to increase the capital of the company through debt conversion and some of them were ready to grant facilities in the payment term, but because the debt conversion procedures were not completed, the opportunity to obtain those facilities has been diminished, the statement added.
After a nearly two-year downtime, some work scopes require extra cost to reach the contractual quality such as improvements before resuming work.
Visa costs associated with the recruitment of labor (for the second time) or the temporary hire of locally available labor at a cost of two to three times the cost allocated to the project budget.
The significant increase in fuel prices, which is one of the main cost components of road and infrastructure projects.
Some of the projects in the stages of assignment to others and some other contracts are assigning a substantial percentage of the remaining work volume of these contracts to the subcontractors with costs higher than the budget allocated to the project.
Costs (pre-construction equipment and works from the studies and establishment of a labor camp and all related to the logistics and negotiation of purchasing materials and purchasing some equipment, etc.), which the company has incurred to date for one of the projects that the company requested the client to return the letter of guarantee with the company's commitment to provide a letter of guarantee when ready to continue this project - costs are charged to the income statement.
During the period of interruption of some projects - or their slow operation - the direct costs of low productivity plus the indirect costs charged to the business increased the total estimated cost of these projects.
Therefore, market procedures and instructions of listed companies with accumulated losses of 20 percent or more of its capital will be applied to Al-Khodari.
The company’s board should invite shareholders not later than Feb. 27 to discuss methods of treating accumulated losses while the meeting should be held by March 29 at most, otherwise the company will be considered dissolved.
Al-Khodari added that as a result of the sharp slowdown, it has laid off over 15,000 employees and more than 1,000 assets (vehicles and equipment) during the period from 2015 to 2018. Since 2014, many projects have incurred additional operating costs.
Liquidity has improved with a number of clients (since late 2018), official notices have been received from a number of clients to continue work, and others have asked to accelerate the pace of the project.
In order to achieve this, it entails the mobilization of at least 7,000 staff and a large fleet of assets, with a mobilization period of four to six months assuming that the visas have been obtained, the Saudi listed firm added.
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