Auditor doubts Central Pharma’s survival amid cash strain

Stock investors of Central Pharmaceuticals have been unsettled after the auditor of the listed drug maker issued an adverse opinion, warning of significant uncertainty over the company's ability to continue operating as a business amid persistent financial distress and regulatory lapses.

In its audit report for the year ended June 2025, the auditor said the company's future was uncertain due to years of losses, growing unpaid liabilities and weak cash generation, raising doubts about its ability to meet obligations.

Mohammad Shibbir Hossain, a partner of Ashraf Uddin & Co, said Central Pharmaceuticals' retained earnings -- the accumulated profits or losses over the years -- have fallen close to its paid-up capital, indicating that past losses have eroded most of the funds invested by shareholders.

Although the company has stated that it has adequate resources to continue operations for the foreseeable future, the auditor said management has failed to raise fresh funds or generate sufficient cash from its core business to pay its current liabilities.

The audit report also noted that the company has not repaid outstanding bank loans and that the National Board of Revenue (NBR) has raised substantial tax claims against it.

In addition, production costs exceeded sales revenue, mainly due to high fixed expenses and limited utilisation of production capacity.

The auditor further flagged regulatory risks, noting that Central Pharmaceuticals has not renewed its drug manufacturing licence.

The company has also failed to pay key statutory and regulatory fees, including Dhaka Stock Exchange listing fees and Central Depository Bangladesh Limited fees, exposing it to penalties, suspension of trading or possible delisting.

"These situations indicate that a material uncertainty exists that may cast significant doubt on the company's ability to continue as a going concern," the auditor said.

In audit terms, a going concern refers to a company's ability to continue operating and meet its obligations in the normal course of business.

The company's financial statements did not adequately disclose these risks, prompting the issuance of an adverse opinion – the most severe form of audit opinion, which indicates that the accounts do not present a true and fair view of a company's financial position.

Shares of Central Pharmaceuticals sold at Tk 8.50 on the Dhaka Stock Exchange on Wednesday. Central Pharmaceuticals raised funds from the stock market in 2013 on expectations of strong growth. The audit warning has heightened concerns among small investors.

Jakir Hossain, a retail investor, said he bought the stock in 2018 after reports suggested the company might be taken over by a large business group. The acquisition never materialised, and the share price later fell sharply, leaving him with a large unrealised loss.

"I was already disappointed as the company has paid only a 1 percent dividend so far. Now this audit opinion has made the disappointment even worse," he said.

Responding to the auditor's observations, Md Tajul Islam, company secretary of Central Pharmaceuticals, said, "Our production is going on, and we have full confidence that the company will remain active."

He said retained earnings were still Tk 7 lakh to Tk 8 lakh below the paid-up capital of Tk 119 crore. "The company reported losses last year, resulting in negative earnings per share, but production and operations would continue," he added.

Regarding the licence issue, Islam said renewal was an ongoing process, and the company was working to complete it.

He acknowledged that some dues to the NBR remained outstanding, but said management hoped the company would not be shut down.