Asiana Airlines reveals wider loss after auditor's red flags, shares plunge (updated)
26/03/2019 01:04
* Says 2018 net loss rises to 196 bln won from 105 bln
* Credit ratings agencies warn may cut Asiana to junk status
* Asiana shares dive nearly 18 pct, shareholder Kumho sinks
28 pct
(Adds comments from analyst, credit rating agency; updates
stocks price)
By Hayoung Choi and Hyunjoo Jin
SEOUL, March 26 (Reuters) - Asiana Airlines 020560.KS
revised its accounts and said its annual loss widened after
auditors raised doubts about the financial statements of South
Korea's second-biggest carrier, sending its shares tumbling
almost 18 percent on Tuesday.
Asiana Airlines said it has got its auditor to sign off on
its 2018 financial statements after reflecting provisions
related to maintenance of leased aircraft and others, which
increased costs.
The company revised down its 2018 operating profit to 28.2
billion won ($24.92 million) from 88.7 billion won, while its
net loss increased to 196 billion won from 105 billion won. The
airline also said its debt was more than six times its equity.
Asiana's auditor Samil PwC had previously said it could not
complete its audit because it had not been provided with enough
information to evaluate the airline's provisional debt related
to maintenance of leased aircraft, as well as the fair value of
stakes in affiliates bought in 2018. urn:newsml:reuters.com:*:nL3N2190MZ
The move prompted two South Korean credit rating agencies to
warn they may cut ratings for the airline to junk status.
Asiana, part of South Korea's Kumho Asiana Group
conglomerate, has sold assets to improve cash flow and reduce
debt from aircraft purchases, as it battles rising fuel costs
and competition from low-cost carriers.
The accounts revision, mounting debt and possible credit
ratings downgrades have raised investor concerns over Asiana's
liquidity position.
Asiana will have to repay around 1 trillion won in debt this
year, said Lee Han-joon, an analyst at KTB Investment and
Securities. If its credit rating is cut, the company will face a
call to pay back some of its debt earlier, he said.
"As doubts grow over the company's capacity to issue
asset-backed securities, which has been its last resort to raise
funds, Asiana could face a liquidity crisis. Further, it's
unclear if it has more assets to sell," Lee said.
Nice Investors Service, one of the two credit ratings
agencies that warned on Asiana's ratings, said it is not
planning to adjust the ratings within this week, while the
other, Korea Investors Service, was not immediately available
for comment.
Shares of Asiana fell to as low as 3,335 won on Tuesday,
before closing at 3,435 won, down 15 percent. That was their
sharpest one-day fall ever. Asiana's biggest shareholder, Kumho
Industrial 002990.KS , slumped as much as 28.3 percent.
Trading in Asiana and Kumho resumed on Tuesday after being
suspended for two days by the Korea Exchange as auditors had
issued qualified opinions on the financial statements of both
companies.
"We vow to recover trust from investors and financial
organisations by adopting strict accounting standards," Asiana
said in a statement on Tuesday.
($1 = 1,131.5800 won)
(Reporting by Hayoung Choi, Heekyong Yang and Hyunjoo Jin;
Editing by Stephen Coates and Muralikumar Anantharaman)
((hayoung.choi@thomsonreuters.com; +82 2 3704 5643; Reuters
Messaging: hayoung.choi.thomsonreuters.com@reuters.net))