June 28, 2019 / 4:23 AM / 5 months ago

Indonesian regulators order Garuda to restate 2018 results, shares drop

JAKARTA (Reuters) - Indonesian regulators have ordered national flag carrier Garuda (GIAA.JK) to “fix and restate” its 2018 financial results over accounting errors within two weeks, and said they would also impose fines on the airline and its directors.

FILE PHOTO - A plane belonging to Garuda Indonesia is seen on the tarmac of Terminal 3, SoekarnoÐHatta International Airport near Jakarta, Indonesia April 28, 2017. REUTERS/Darren Whiteside

The financial regulator, OJK, said Garuda and its directors would each be fined 100 million rupiah ($7,078), in addition to another collective sanction that will be imposed on directors and commissioners who had signed off on the results.

Garuda’s shares fell as much as 7% after the news to hit their lowest since January, and came under further pressure as the Indonesia Stock Exchange issued a statement asking the airline to restate its 2019 results as well.

The carrier, in a statement, said the regulators’ decision was “premature” and said it would need to further re-examine the results given its “different interpretations”.

While it was not immediately clear what accounting errors regulators were referring to, two of Garuda’s largest private shareholders had in April questioned the airline’s 2018 results and alleged it misrepresented a $240 million financial transaction - a claim the airline rejected.

CT Corp and Finegold Resources Ltd, which own a total 28 percent of Garuda’s shares, said they had refused to sign the earnings report over the “misleading” way it portrayed an October 2018 deal.

Garuda, majority-owned by the Indonesian government, in its 2018 financial report indicated a profit of $809,850, after struggling with fuel costs and a firmer rupiah.

But the shareholders have said they believe Garuda should actually be listing an additional loss of $240 million that it was still owed by PT Mahata Aero Teknologi.

The airline forward-booked this revenue from Mahata in its earnings. The company had agreed to pay Garuda in exchange for installing WiFi connectivity and ads on some planes.

Regulators did not respond to questions over whether the accounting errors related to this same deal.

However, Garuda in its statement on Friday referred to shareholders’ allegations and said Mahata Aero Teknologi had agreed to pay Garuda $30 million by July.

The rest will be covered by a guarantee of payment letter issued on behalf of Mahata by a reputable bank, Garuda added.

($1 = 14,128.0000 rupiah)

Reporting by Cindy Silviana, additional reporting by Fran Nangoy, writing by Fanny Potkin; Editing by Himani Sarkar

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