Auditors punch holes in Spanish tuna giant’s Malta operation

Auditors of Fuentes’s Malta tuna subsidiary say its liabilties with the Fuentes group have  cast “a significant doubt on the company’s ability to continue as a going concern”

Latest NSO data paint the picture of a tuna industry in rude health, growing by 15% in 2017 to an output of €203 million. Simultaneously, however, the costs of the industry rose exponentially by 42%, or €61 million.
Latest NSO data paint the picture of a tuna industry in rude health, growing by 15% in 2017 to an output of €203 million. Simultaneously, however, the costs of the industry rose exponentially by 42%, or €61 million.

Auditors have released the annual accounts of Spanish tuna giant Ricardo Fuentes in Malta with a cautionary note after a sudden reversal from a massive profit in 2016 to a loss in 2017.

They said adequate accounting records had not been kept and a rise in the company liabilities of Mare Blu Tuna Farm had posed doubt on whether the company could continue as a going concern.

And yet the net loss coincided with another year of positive sales of tuna, for both the company and the entire tuna industry.

But a sudden downturn in the “value added” of Malta’s tuna and aquaculture industry in 2017 has been linked to an inexplicable rise in operating expenses.

The latest data from the National Statistics Office appears to paint the picture of a tuna industry in rude health, with tuna and other fish-farming activities growing by 15% in 2017 to an output of €203 million.

Simultaneously, however, the costs of the industry rose exponentially by 42%, or €61 million.

That increase in industry costs has completely reversed a trend of growing value added: in 2014, the tuna industry had a gross value added of €18 million, growing the year after to €21 million, then €34 million, and in 2017 suddenly crashing to just €147,000.

Gross value added of tuna industry, in € 000s
 
 2014201520162017
Output 101,951.7131,596.7177,535.7203,855.0
Tuna farming81,462.1111,089.3152,501.3168,356.3
Closed cycle species15,879.416,835.711,511.712,045.8
Change in stocks4,444.23,290.29,058.920,999.3
Other output166.0381.54,463.92,453.5
Less intermediate consumption83,211.2110,510.3142,809.7203,712.2
Value added, gross18,740.521,086.534,726.0142.7

Fishers and industry watchers who spoke to MaltaToday said the anomaly made no sense. “How can an industry that is posting annual increases in sales and profits, suddenly go down from a value added of €34 million to just €147,000?” said a government aide who alerted the newspaper to the NSO data.

One industry player contacted by this paper, defending the profits made by his company, pointed fingers at the Fuentes subsidiary in Malta – saying that a sudden reversal from profit to loss in 2017 could have influenced the entire industry’s rise in operating expenses, although there is no smoking gun to suggest such a direct correlation.

As the accounts of the Mare Blu Tuna Farm Limited company show, the Fuentes fish farming operation in Malta has gone from a pre-tax profit of €7.9 million in 2016, to a massive loss of €11 million in 2017 – a downturn of 152% in what was supposed to be a year of booming tuna sales.

In fact, Mare Blu actually recorded increased sales, up from €53 million to €56 million in 2017.

But the company has also registered a doubling of “related party” creditors in 2017, up to €37 million: unsecured loans, with no fixed date of repayment, and at interest rates of 3% or zero rates to Fuentes companies and subsidiaries.

Indeed, in 2017 Mare Blu’s liabilities exploded with the increase in its creditors: basically companies from the Fuentes group such as ship registration companies Princesa Guasimara, Golden Sea Trading, Waterline Trading, Frigorificos De Tunidos SA, Commercializadora de Armuelis SA, Tuna Graso, and Viver Atun Cartagena.

The company’s own auditors flagged the sudden increase in these liabilities.

“The company incurred a net loss of €7.5 million [in 2017] and the company’s total liabilities exceeded total assets by €7.77 million… these events or conditions, along with other matters… indicate that a material uncertainty exists that may cast significant doubt on the company’s ability to continue as a going concern.”

The auditors also stated in their report that they had not received all the information and explanations required for their audit.

“Adequate accounting records have not been kept, or those returns adequate for our audit have not been received from branches not visited by us. The financial statements are not in agreement with the accounting records and returns.”

The chief executive of the Federation for Maltese Aquaculture Producers, Charlon Gouder, who said the NSO data also showed a picture of a growing industry, however, expressed caution when shown the figures.

“I am saddened and perplexed at the statistics because the picture I have of the companies we represent is one that has reported profits on which corporate tax has been paid.”

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