News Room - Steel Industry

Crowe Horwarth, the external auditor of loss-making Kinsteel Bhd and its unit Perwaja Holdings Bhd, has expressed doubts about the group’s ability to remain as a going concern, as the two steelmakers struggle with deepening losses and mounting debts.

Kinsteel’s current liabilities at the group’s level exceeded its current assets by RM646mil, while the gap was at RM430mil the company’s level.

The independent audotors, in a report posted on Bursa Malaysia by Kinsteel, said this indicated a “material uncertainty which may cast significant doubt about the group’s and the company’s ability to continue as going concerns.

Meanwhile, the auditors also cast similar concerns about Perwaja after the company continued to miss paying its debt obligations.  

Perwaja’s total borrowings amounted to close to RM1.1bil as at June 30. The company is currently in the midst of restructuring its debts and is required to submit a plan by the end of the month.

Crowe Horwath said it had also raised concerns to the management about the validity and recording of certain transactions by the company.

It said it had not been able to verify certain transactions by Perwaja from July 1 to Sept 30 last year, which amounted to about RM12.8mil.

The audit firm added that it has not been able to obtain certain bank reconciliation required by Perwaja to verify the veracity of bank balances and overdrafts as the management was not able to obtain certain bank statements. 

“We have not been able to obtain sufficient appropriate audit evidence to provide a basis of an audit opinion,” it said.

Meanwhile, in a separate filing, the external auditor of another loss-making steel manufacturer Lion Corp Bhd had said that the company might not be able to continue operation if it failed to renew or extend repayment of existing borrowings among others.

Ong Boon Bah & Co said Lion Corp incurred a net loss attributable to the owners of the company of RM523mil for the financial year ended June 30, 2015.

“In addition, as at June 30 up to the date of this report, certain borrowings and payables were not repaid in accordance with the scheduled payment dates,” it said.

Ong Boon Bah noted that Lion Corp had done certain measures to improve the group’s liquidity and financial position, and to “remediate” delayed repayments to lenders and creditors.

The audit firm said that it was unable to obtain sufficient and appropriate audit evidence in relation to the rationales of the assumption used to assess the group’s future profitability.