Inquiry into Sea Malta's surprise profits

Government Investments Minister Austin Gatt is to order an inquiry into what led to the sudden "unrealistic" appreciation of a Sea Malta vessel, which turned the company's much-talked-about losses into a profit.

The company at the centre of a stormy privatisation process, has registered a profit of Lm235,764 for the year ending March 2005, according to the annual financial accounts seen by The Sunday Times.

For the same period, the Sea Malta group as a whole posted a profit of Lm276,633. This means a turnaround of Lm2.72 million from last year for the company and Lm2.16 million for the group.

The same accounts show however that Sea Malta lost over Lm400,000 from its core business - the transportation of cargo.

The annual accounts were approved during Wednesday's meeting of the board of directors, and are expected to be made public at the annual general meeting on July 28.

But the Government Investments Ministry has branded the turnaround in the company's profits as nothing more than "monkey business" intentioned to disrupt privatisation through "window-dressing" tactics.

Last month, the government signed a memorandum of understanding for the transfer of Sea Malta shares to Atlantica SpA di Navigazione, a company forming part of the Italian Grimaldi Group.

Dr Gatt and former Sea Malta chairman Marlene Mizzi have been at loggerheads over the viability of the company. Ms Mizzi resigned her post last month, accusing the government of being foolish and short-sighted after it effectively abdicated its responsibilities to the company for several years.

Dr Gatt had said that Sea Malta was expected to post losses of around Lm0.5 million for the year ending March 2005, but the accounts seen yesterday surprisingly showed the company had posted profits of Lm235,764.

The point of contention is the so-called 'net impairment loss' in the balance sheet pertaining to mv Maltese Falcon. The impairment loss represents the difference between the carrying amount of the vessel and its market value.

Given that both the value in use and the market value of the vessel were lower than its carrying amount, the directors had determined an impairment loss of Lm814,616 for 2004.

But on June 15, more than two months after the end of the financial year, the same valuers determined that the value of the same vessel had increased to €5.5 million. According to the notes to the financial statements, this came about because of stronger demand for the purchase of RoRo vessels and an increase in rates charged for the time charter of such vessels.

A net impairment reversal of Lm666,674 was credited to the profits for the year ended March 2005.

But a spokesman for the ministry would have none of it:

"You don't need to be an accountant to know that vehicles and vessels, unlike property, depreciate and do not appreciate in value, especially to such an extent," he said.

The minister will in fact tomorrow initiate an inquiry to establish how the vessel evaluation was carried out and why such figures were not disclosed or indicated by management to the privatisation unit before June 15.

The spokesman said that if one were to exclude the figures attributed to mv Maltese Falcon, the accounts confirmed that Sea Malta's core operations had in fact lost Lm1 million in 2004, and Lm0.5 million in 2005.

Contacted yesterday, Ms Mizzi stuck to her guns and said that the financial figures proved what she had been trying to state all along - that Sea Malta is a company of great potential.

"Unfortunately the shareholder was not appreciative enough," she said.

She said that she was aware that Sea Malta would be registering a profit but she was not in a position to reveal anything as she was not prepared to breach the confidentiality, which binds board directors.

Ms Mizzi said that when the ministry published information about the financial results of Sea Malta for the years ending March 2004 and March 2005 just before her resignation, she had drawn its attention, as well as that of Mimcol, that the publication of these figures was not only premature but constituted an unethical breach of confidential company information.