KUALA LUMPUR: The Defence Ministry (Mindef) did not conduct comprehensive due diligence on Boustead Naval Shipyard (BNS) in regard to the procurement of the controversial littoral combat ships (LCS).
According to the report by the Special Investigation Committee on Public Governance, Procurement and Finance (JKSTUPKK) which was declassified today, the company had financial troubles.
Based on an analysis of BNS's financial statements between 2014 and 2018, the committee said the company suffered losses in three out of those five years.
"BNS's accumulated losses were found to have increased to RM462 million in 2018, affecting the company's equity to negative RM332 million (paid-up shares RM130 million)."
The committee said the financial management and cash flow problems faced by BNS caused payments to suppliers to be delayed.
As a result, the suppliers refused to supply raw materials and equipment to the point where the construction work at the shipyard was stopped.
The report also revealed that BNS was burdened with high loans. Up to May 31, 2019, BNS's loans amounted to RM956.86 million.
"The debt ratio analysis to measure the percentage of total assets financed by the debt found a worrying trend.
"BNS is expected to face difficulties and inability to pay its interest and debt in the long term if its financial conditions continue to be weak."
It also found that in its previous contracts and projects, BNS had performed poorly, the report said.
