Jiutian Chemical said on Wednesday that its board was of the opinion the company could continue as a going concern, in comments following its independent auditor expressing “material concern” over the issue.
“There are reasonable grounds to believe that the group have adequate resources to continue their operations as going concern,” Jiutian Chemical said in a filing to SGX on Wednesday.
“Additionally, the board is in the opinion that sufficient information has been disclosed for trading of the company’s securities to continue in an orderly manner; and confirmed that all material disclosures have been provided for trading of the company’s shares to continue,” the filing said.
It pointed to measures to improve the operational performance and financial position, as well as continued financial support from Anhua and Anyang Jiulong. That included sourcing for new customers and holding talks with the group’s major customers to seek higher sales volumes and to negotiate for better prices, the filing said.
In addition, the group said it is pursuing better production efficiency with technological enhancements to reduce production costs.
The company’s independent auditor, Baker Tilly TFW LLP, had included an emphasis of matter on the material uncertainty related to going concern in its audit report, the filing said.
Baker Tilly’s report point to the group’s current liabilities exceeding current assets by 21.21 million yuan as of end-December.
“These factors indicate the existence of a material uncertainty that may cast significant doubt about the group’s and the company’s ability to continue as going concerns and to realize their assets and discharge their liabilities in the ordinary course of business,” the auditor’s report said.
The auditor noted that the group’s share of losses from its associated companies, Anyang Jiulong Chemical and Anyang Jiujiu Chemical Technology, was 48.38 million yuan in 2018, while those associates accounted for around 20 percent of the group’s total assets.
“The significant losses in associated companies is considered an indication that the non-financial assets of the associated companies and consequently, the company’s investment in associated companies may need to be impaired,” Baker Tilly said. “We considered this is to be a key audit matter because of the significance of these investments and the element of judgement and estimates applied by management.”
Correction: This item has been updated to correct the spelling of Jiutian Chemical.