Masteel's auditor issues qualified opinion on FY14 financials

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KUALA LUMPUR (June 22): Malaysia Steel Works (KL) Bhd's (Masteel) independent auditor has issued a qualified opinion on the assessment of the company's numbers for financial year ended December 31, 2014 (FY14). This was due to insufficient evidence to support the validity of certain transactions.

In a statement on Bursa Malaysia's website, Nexia SSY Chartered Accountants raised concerns on Masteel's sales transactions involving an oustanding amount of some RM287 million. Nexia said it was concerned about the transactions with the customers involved.

As such, Nexia said it was was "unable to verify the recoverability" of the outstanding amount, which was included in Masteel's trade receivables of RM334.54 million.

Meanwhile, Nexia said it was also unable to ascertain the nature of a sales arrangement between Masteel and a foreign trading house (FTH). Under the deal, which failed to materialise,  Masteel was supposed to supply steel products at pre-determined prices to the FTH during the year.

The FTH had agreed to make advance payments to the company pending fulfilment of the sales orders.

Following termination of the sales arrangement, Nexia said Masteel had to refund the advance payments to the FTH. The refund amounted to US$25 million, which includes US$1.33 million (RM4.35 million) as cancellation charges.

“As at December 31, the amount of advances outstanding amounts to RM101 million with orders extending into 2015,” Nexia said.

Nexia's report coincided with Masteel's annoucement of its FY14 audited accounts.

Trading in Masteel shares has been suspended since May 12 this year after the company failed to submit its FY14 audited accounts within regulators's deadline. Its shares were last traded at 62 sen for a market capitalisation of RM151.3 million.

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