Metal Reclamation’s auditor expressed disclaimer of opinion

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KUALA LUMPUR (Nov 4): Metal Reclamation Bhd’s external auditor Messrs Crowe Howarth has expressed a disclaimer of opinion on its audited financial statements for the financial year ended June 30, 2014 (FY14), highlighting the ability of the group to continue as going concerns due to its loss-making position as well as default in repayment of bank loans.

This marks the fourth company that has received a disclaimer opinion from its auditor in the past two weeks.

On Oct 31, Asia Knight Bhd and Bina Goodyear Bhd had announced to Bursa Malaysia that their external auditors’ reports contained a disclaimer of opinion by Messrs Nexia SS and Messrs Morison Anuarul Azizan Chew respectively. Petrol One Resources Bhd, meanwhile, has received a disclaimer of opinion for the third time from its auditor KPMG on Oct 30.

Metal Reclamation and Asia Knight slipped into the Practice Note 17 (PN17) category on Aug 29 and Oct 31 respectively, joining Bina Goodyear and Petrol One.

In Metal Reclamation’s case, Crowe Howarth said the timely formulation, approval and implementation of the group’s proposed regularisation plan, including obtaining the support from the lenders – to which the ability of the group to continue as going concerns is dependent upon – remain uncertain at this stage.

In addition to its PN17 status, Metal Reclamation also announced its default in payment pursuant to Practice Note 1 (PN1) of the main market listing requirements of Bursa on Sept 2. The group is currently working towards formulating a regularisation plan to address its PN1 and PN17 status. 

Crowe Howarth noted that the group and company incurred a net loss of RM5.2 million and RM4.43 million, respectively, for FY14 and that the group and company’s current liabilities exceeded its current assets by RM107.1 million and RM379,000 respectively as at June 30.

It also said the financial institutions have served writs of summon and/or letter of demand against the group and company to demand immediate repayment of the outstanding bank borrowings – which the group has defaulted in their repayment obligations. 

A check with Metal Reclamation’s FY14 audited accounts showed that it had RM96.6 million in short term borrowings and RM2.5 million in bank overdrafts as at June 30, with no long-term liabilities.

“As explained in the basis for disclaimer of opinion [above], and because of the significance of the aforesaid matter, we have not been able to obtain sufficient appropriate audit evidence to provide a basis of an audit opinion. Accordingly, we do not express an opinion on the financial statements,” Crower Howarth said.

The auditor added that should the going concern basis of preparing the financial statements be no longer appropriate, adjustments would have to made to reduce the value of all assets to their estimated realisable values, and to provide further estimated liabilities that may arise, and to reclassify property, plant and equipment and other non-current assets and non-current liabilities as current assets and current liabilities respectively. 

Shares of Metal Reclamation – which reclaims and sells lead and lead alloys, trades drained batteries, copper scrap, cast iron scrap, and aluminum scrap – fell 7.5 sen or 10.79% to settle at 62 sen today, giving it a market capitalisation of RM29.61 million.