A report out this month on the status of EMS provider Elcoteq’s Q2 financials, and titled ‘Dead man walking’, should give readers an idea the future does not bode well for the struggling Finnish EMS company. (See, also: ‘Elcoteq CEO is out. Why and what’s next?‘)
Independent Equity Research writes that Elcoteq has not been able to find a solution to arrange adequate financing and Elcoteq can no longer run its operations in a normal way. Basically, Elcoteq will be bankrupt unless it can find new financing very quickly, the report states.
Going concern no longer applies to Elcoteq
As Elcoteq does not have adequate financing available to run future operations, it no longer adapts a going concern basis in preparing its financial statements states Independent.
This was why Elcoteq’s recent Q2 EBIT included impairments of 27.7 mEUR and the financial results released by Elcoteq were terrible. However, Elcoteq’s operational profit was in-line with some on Wall Street but, at this point it hardly matters said Independent.
No visibility, possible no future
Independent further writes that due to actions taken by Elcoteq lenders, accompanied by consecutive reactions by Elcoteq suppliers and customers, Elcoteq has no real outlook visibility for the remainder of the year.
Basically, its impossible to estimate the result of H2, but most likely Elcoteq’s remaining customers are running for the hills, since they can no longer trust Elcoteq’s ability to deliver writes Independent.
Independent goes further to state Elcoteq is ‘hiding’ its lenders in controlled management under the laws of Luxembourg and that Elcoteq’s three Finnish subsidiaries already filed for bankruptcy and without either new funding or cooperation with current lenders Elcoteq will follow soon.
In summary, and without pulling any punches, Independent writes Elcoteq’s reputation as a reliable EMS provider is already destroyed; no new financing is available and, since Elcoteq parents’ real own equity is already negative (-35.7 mEUR) shareholders are most likely left with nothing in bankruptcy, which the report states is the most likely scenario.
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