The state company "United Mining and Chemical Company" (UMCC) reported net profits of 30.2 million UAH for Q1 2024 in early May. According to UMCC's management, these positive financial results were achieved thanks to successful real product sales in foreign markets, expanded sales geography, and restructured logistics. This was reported by Minprom.
However, a more detailed analysis of the state company's financial and economic reports reveals that the source of these profits was not the core activities of its enterprises, but rather "other operating income," i.e., adjustments to accounting data. Specifically, according to UMCC's Q1 2024 report, the company's "other operating income" amounted to 209.2 million UAH.
Traditionally, this item includes write-offs of accounts payable, reserves, fines charged to counterparties, positive foreign exchange differences from the strengthening of the national currency, as well as reversals of previously created reserves and asset revaluations.
Based on the official financial and economic reports for Q1 2024, it can also be concluded that the previously announced quarterly profit of 30.2 million UAH by UMCC's top management also has a "paper" nature, i.e., it was not generated from core production activities and is not tied to actual sales of raw materials.
According to experts, such large positive figures in the "Other Income" category, coupled with the continuing negative trend in production and sales for the third year in a row, may indicate a deliberate distortion of accounting reports to conceal losses and artificially inflate financial performance.
Among the negative trends in UMCC's operations, which also contradict the optimistic statements of the state company's top management, a particularly noticeable development has been the increase in production costs and a decline in sales profitability from 22% in 2023 to 13% in Q1 2024, as well as a $0.5 million increase in advances to suppliers, which could indicate working capital issues.
As previously reported in the media, the past 2023 fiscal year was a record year for UMCC in terms of profit declines and loss growth. Profit from operating activities in 2023 went into the red by 311.6 million UAH, whereas at the end of the first year of the war, these figures were positive at 163.1 million UAH (a 295% year-over-year decline). Net profit for 2023 was minus 481.3 million UAH, and the unallocated profit (uncovered loss) amounted to minus 651,428 thousand UAH, an increase of 298.36% compared to 2022.
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