Lorenzo Shipping Corporation incurred a net loss of ₱541.78 million in 2024, leading to a cumulative deficit of ₱1.13 billion as of December 31, 2024. Additionally, the company’s current liabilities exceeded its current assets by ₱1.27 billion, further highlighting liquidity concerns.
Despite these financial challenges, the company’s financial statements have been prepared on a going concern basis. Management’s assessment of its ability to continue operating hinges on several critical assumptions—primarily projected revenues, operating expenses, and capital expenditures.
These projections are subject to heightened estimation uncertainty, especially given prevailing economic conditions, the volatility in global fuel prices, and the feasibility of securing external financing. Due to the significant judgment and estimation involved, this assessment has been identified as a key audit matter.
As of year-end, the company’s property and equipment totaled ₱1.17 billion, representing 43% of its total assets. However, the volatility in fuel prices and intense competition in the container shipping industry have impacted the company’s operations, contributing to its financial loss in 2024 and prior impairments from vessel and equipment sales.
The company’s auditors say that should indicators of impairment arise, assessing the recoverable amount of these assets would require considerable judgment. This includes estimating future cash flows, applying appropriate discount rates, and projecting revenue growth, operating costs, and capital expenditures—all of which are highly sensitive to external market conditions.
The continued uncertainty surrounding fuel prices and economic outlook further amplifies the complexity of these assessments, making them another key audit matter for the year.
