SCIB says its financials could be impacted by impairment following contract termination

KUALA LUMPUR (July 6): Sarawak Consolidated Industries Bhd (SCIB) said its financial year ended June 30, 2023 will be negatively impacted should a full impairment pertaining to final claims, worth RM18.72 million, from a contract termination involving civil servant housing development works in Perak, be made.

In a filing on Thursday (July 6), SCIB said the group’s subsidiary SCIB Properties Sdn Bhd (SCIBP) and Awana JV Suria Saga Sdn Bhd (AJVS) have mutually agreed to scrap the engineering, procurement, construction, and commissioning (EPCC) contract involving housing development works in Muallim, Perak.

It added that the final claims from the termination amounting to some RM18.72 million stated in the settlement agreement signed between the two parties has not been impaired.

The amount, according to the filing, was the advanced various sums to and/or on behalf of AJVS, which will settle the debt to SCIBP in accordance with the payment schedule in the agreement.

“The outstanding balances will be subject to impairment review in the next reporting quarter, in any event should the outstanding balances be fully impaired, the group's gearing will be increased and earnings per share as well as net assets of SCIB will be reduced as a result of the impairment loss for the financial year ending June 30, 2023," said SCIB.

Nonetheless, it said any impairment loss will be written back upon subsequent recovery of the debts, SCIB noted, adding that the settlement agreement will not have any effect on the issued share capital and the shareholdings of substantial shareholders of the company.

Both SCIBP and AJVS have signed a settlement agreement with AJVS to mutually end the EPCC contract. SCIBP said it has decided to take necessary measures to protect its interests by mitigating risks associated with the stagnation of the project’s progress.

“This termination is in the best interests of the company as we are concerned on the lack of progress since the inception of the contract,” SCIB managing director Ku Chong Hong said.

As per the contract, there will be no penalties or liquidated ascertained damages on SCIBP, Ku added.

SCIB's share price closed one sen or 2.1% lower at 46.5 sen on Thursday, giving the group a market capitalisation of RM297.7 million.