Sumatec

Sumatec’s auditors have expressed a disclaimer opinion in the company’s latest audited accounts for the financial year ended Dec 31, 2010. It reported wider losses in its audited results for FY ended Dec 31, 2010.

There was a variance of more than 10% between the loss after tax and minority interest in the announced unaudited fourth quarter result made on Feb 28, 2011 and the audited financial statement made on April 29 2011 for FY 2010. The audited net loss after tax and minority interest is RM35.703 million which is RM28.286 million higher than the unaudited net loss after tax and minority interest of RM9.417 million.

The difference is substantially due to the following arising out of independent valuations dated March 31, 2011 commissioned by the company of some of its current and non current assets pursuant to which the company has incorporated in the financial statement of the company for FY 2010 for any deficit arising from such valuation of the assets.



Sumatec's auditors SJ Grant Thornton was not convinced of the company's ability to secure new contracts.

The auditor highlighted that Sumatec did not impair goodwill on its subsidiary's consolidation and deferred tax assets of RM33.48 million and RM13.15 million respec-tively. It also added that the company's trade receivables of RM5.91 million have been long outstanding and not impaired.

In most cases, the auditors are just making sure that provisions are being made on uncollectable debts. The rule of thumb today is to make provision for debts that can't be collected in six months.

To recap, Sumatec had offered a renounceable rights issue to raise rm18.8 million.



Going forward, will Sumatec bring itself back to profitability and what will become to the assets left within the company? As a PN17 status company, it has 12 months to submit a regularization plan to the authorities.

For FY2010 ended Dec, it appears that losses narrowed for Sumatec due to higher profits at its shipping division and lower losses at its EPCC segment. Revenue also has more than doubled to rm59.2 million.

It last awarded project was in March 2010 when it received a rm49.2 million contract.

Over the past two years, it has been actively working to streamline its operations to concentrate on its EPCC business that serves the O&G industry.



Sumatec’s total borrowings stand at rm578 million and it has negative cash flow of rm230000.

Its auditors’ report points brought up for the disclaimer of opinion included issues on impairment losses and whether the company would be able to recover the receivables stated in the FY2010 results.

It was unable to concur with several assumptions made by Sumatec, such as the use of discounted cash flow projections based on current and future projects, which the auditor notes are an area of uncertainty.

It is uncertain about the recovery of rm72 million worth of receivables as well as the fact that its current liabilities exceed its current assets by rm140 million.