The financial statements released yesterday by Dor Chemicals, controlled by the Dankner family, included a going concern warning on its Treofan subsidiary. The Dor Chemicals Group holds 51 percent stake in Treofan, which consolidates all the group's activities overseas and accounts for some 90 percent of Dor's operations.
The going concern warning in the accounts by Kesselman & Kesselman Pricewaterhouse Coopers Israel was attributed to Treofan's failure to meet one of five financial standards, and a loan of NIS 1.23 billion in the balance sheet was reclassified as short-term credit instead of being a long-term liability.
An accountant attaches a warning of a "going concern" if the CPA believes that, without external intervention or change in financing arrangements, there is a risk of the enterprise not continuing as a going concern.
The two banks that finance Dor Chemicals' activities overseas, Bear Stearns and J.P.Morgan, commissioned an outside consultant to check the company's business plans and the state of Treofan's market. Dor chairman Ziv Mor said that the company was in negotiations with the banks, and that the problem would be solved within the next few weeks.
Mor added that there was no fear over Treofan's financial stability, as even the banks recognized that its inability to meet conditions of the loans had been affected by external factors as well as by the weakness of the oriented polypropylene (OPP) film market. Treofan manufactures OPP films, CPP (cast polypropylene) and PLA films (biaxially oriented polyactic acid).
Dor's accountants wrote:"At this stage, the banking concerns have not demanded the immediate repayment of the loans, and they are conducting an evaluation of the state of the market and Treofan's business plan that was presented to them in March 2004. A demand by the banking concerns for an early repayment could raise a material doubt over the Treofan Group's ability to continue as a going concern."
Dor Chemicals posted pre-tax losses of NIS 103 million in 2003, on sales of NIS 2.75 billion. The group employs some 2,200 workers across the world.
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