Published June 1, 2009

Advance SCT reports loss of $136.6m

$70.8m loss booked from discontinued operations relating to M'sian units

By KALPANA RASHIWALA

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COPPER recycler Advance SCT has posted a net loss of $136.6 million for the year ended Dec 31, 2008, against a restated net profit of $4.1 million in the preceding year.

Lacklustre: Advance SCT booked an after-tax loss of $67.6 million from its continuing operations which was partly due to the sharp fall in copper prices

The group, which suffered from the dive in copper prices, also booked a $70.8 million loss from discontinued operations relating to its Malaysian subsidiaries TTM Industries (M) Sdn Bhd (TTMI) and Tsing Technologies (M) Sdn Bhd (TTM). The group is in the process of disposing of its entire interests in the two units.

Over the weekend, Advance SCT also announced the findings of a report by Ernst & Young Advisory Services (which it engaged to conduct a special audit of the two Malaysian units), which has 'raised issues on the veracity' of the management accounts of the two units.

The veracity issues relate to certain transactions of the two units that could not be determined by E&Y due to inconsistencies in documentation, lack of proper supporting documentation and 'uncommon business practice', among other factors.

'The board views the findings of the report with serious concerns and will be reporting the findings to the relevant regulatory and governmental authorities,' Advance said in a filing to Singapore Exchange late on Friday night.

For financial year 2008, the loss from discontinued operations included impairment on doubtful receivables for TTMI of $11.5 million and for TTM of $10.3 million.

In addition, taking a prudent approach for the consolidated group accounts, the net asset values of TTMI and TTM as at Dec 31, 2008, have been written down by $17.7 million to equate to their total liabilities. Hence the net carrying value of TTMI and TTM on the group accounts is nil.

Advance SCT also booked an after-tax loss of $67.6 million from its continuing operations and this was partly due to the sharp fall in copper prices.

FY 2008 was an 'exceptionally difficult year for the group', with revenue declining to $191.9 million from $304 million in the preceding year. Advance SCT blamed the global financial crisis as a key factor for the revenue slide in the second half of FY 2008 as the crisis caused not only a reduction in demand for copper scrap and products but also resulted in the sharp fall in copper prices.

Other factors for the loss from continuing operations included impairment on doubtful trade receivables of $11.1 million (the major provisions were $4.3 million for Tsing Yi Enterprises and $6.3 million for SCT Technologies) and a goodwill write-off of $11.7 million relating to the acquisitions of TTMI ($10.8 million) and PT Nuansa Citra Cemerlang ($900,000) as these investments have been impaired.

The company issued a profit warning on April 29 saying that the group consolidated loss for FY 2008 will be $100 million or more, subject to completion of an audit.

The group had negative net asset value per share of 5.62 cents as at Dec 31, 2008, against positive NAV per share of 38.68 cents at end-2007.

Cash and bank balances were whittled from $53.5 million at end-2007 to $2.3 million at end-2008.

Advance SCT also had net current liabilities of about $66.5 million as at end-2008, against (restated) net current assets of $28.2 million a year earlier, at group level.

The latest results statement also show that bankers' facilities for TTMI of RM123.9 million (S$51.3 million) are secured against corporate guarantees of the company.

Looking ahead, Advance said: 'Weaknesses in management and accounting controls had also contributed to the cashflow difficulties today. The group expects to continue to face a challenging business environment in the coming year while it restructures itself to recover from a tight cashflow situation.'

Among other things, it is considering divesting non-core businesses to unlock liquidity.

The board and management are also reviewing options to grow the group, including forming strategic alliances to leverage on the expertise, financial muscle and market access of more established players in the business.