KUCHING: Subur Tiasa Holdings Bhd’s independent auditor Crowe Malaysia PLT has issued an unmodified audit opinion with a material uncertainty related to going concern in respect of the company’s audited financial statements for the financial year ended Dec 31, 2022 (FY2022).
The auditor drew attention to Note 4 in the financial statements, which indicates that as at Dec 31, 2022, Subur group’s current liabilities exceeded its current assets by RM378.8 million (2021: RM393.8 million).
This condition gives rise to concerns about whether the group has sufficient cash flows to meet its obligations for the next 12 months from the end of the reporting period, and whether the use of going concern basis in the preparation of the financial statements is appropriate. This was in spite of the net profit of RM44.7 million (2021: RM73.0 million) and net cash inflows of RM96.6 million (2021: RM172.5 million) recorded by the group for the financial year.
“In assessing the appropriateness of the financial statements having been prepared on the going concern basis, management has considered the group’s cash flow forecast for the financial year ending Dec 31 2023 taking into account the factors as enumerated in Note 4 to the financial statements as well as the availability of approved unutilised credit facilities granted to the group.
“Barring any unforeseen circumstances, management has a reasonable expectation that the group will generate sufficient cash flows for the next 12 months to allow it fulfilling its obligations as and when they arise. Accordingly, the financial statements of the group have been prepared on the going concern basis.”
“Our opinion is not modified in respect of this matter,” said the independent auditor in its report.
In a filing with Bursa Malaysia, Subur said the independent auditor has expressed an unqualified audit opinion on the company’s financial statements for FY2022, and that the latter’s opinion is not modified in respect of the statement on the matter.
In relation to the key audit matters, Subur said despite the lingering impact of the post COVID-19 pandemic, the group recorded after-tax profit of RM44.7 million for FY2022, which was contributed by its plantation segment.
The group generated net operating cash inflows of RM96.9 million, and recorded earnings before interest, tax, depreciation and amortisation (EBITDA) of RM143.7 million for FY2022.
Subur said the group continues to streamline its timber operation to ensure cost-efficiency and higher productivity. For FY2022, the group recorded a pre-tax loss of RM1.2 million (2021: -RM58.1 million) for its timber logging and manufacturing operations. The substantial reduction in pre-tax loss was achieved through streamlining operations and cost-rationalisatiion initiatives implemented since the previous financial period.
The company said the group will continue with business reorganisation to optimise costs and consolidate operations so as to further reduce losses and cash outflows from the operations.
“Subur has been focusing on its operations in oil palm plantation segment. As at Dec 31 2022, the group owned a total planted area of 21,145 hectares (ha) of oil palm plantations. Of these planted areas, 75 per cent of the plantations are between 8 and 16 years of age, which is when the trees are expected to be at their optimum yield, 23 per cent of the group’s planted area is between 3 and 7 years of age, which is expected to contribute positively to future profitability and cash flows.
“During FY2022, the oil palm operations recorded a pre-tax profit of RM76.9 million (2021: RM165.5 million) and contributed to net operating cash inflows of RM161.3 million (2021: RM162.5 million). This boosted profit and cash flows contribution to the group’s oil palm plantation segment was attributed to the commendable yield improvement for the financial year as well as the high crude palm oil (CPO) price, which is expected to sustain for the next 12 months. For FY2022, Subur’s FFB production was 345,488 metric tonnes which is the highest since inception — indicating twelve constructive years of sustainable growth,” said the company.
Subur said the group has been able to meet all its debt obligations during FY2022 and these financial facilities, which are subject to periodic review, have been renewed consistently.
“As at Dec 31 2022, the group’s total borrowings amounted to RM661.9 million (2021: RM637.1 million), of which RM437.7 million (2021: RM423.3 million) were classified as current liabilities. Of these borrowings of the group, RM389.9 million are subject to yearly review. The balance of the borrowings is those with fixed repayment terms. The group believes that the cash flows from the oil palm plantation segment are sufficient to address borrowing with fixed repayment terms, including those borrowings of the timber logging and manufacturing operations.
“For FY2022, the group has generated net operating cash inflows of RM96.9 million (2021: RM172.5 million). The group believes that they will continue to have the support of the bankers as they have not defaulted in any repayment obligations and the bankers have consistently renewed the credit facilities that are subjected to annual review without any material modifications.
“To meet any shortfall in working capital requirements as at the reporting date, the group has available approved unutilised credit facilities of RM108.9 million. The bankers are assured and confident with our turnaround and continuous improvement in financial results and FFB production.
“Accordingly, the group’s debt-to-equity ratio has improved from 1.01 (FP2021) to 0.96 in FY2022 and is expected to further improve in FY2023,” added Subur.
Subur said its board of directors strongly believes that the group’s business is still relevant with the positive market outlook for its plantation segment. “Management is confident that the group will be able to improve its operational results and profitability, and generate sufficient cash flows for the financial year ending Dec 31 2023,” it concluded.
