Auditor casts ‘significant doubt’ on Nam Cheong’s future

Singapore-listed vessel builder Nam Cheong might not have a very bright future. This is according to the company’s independent auditors.

BDO LLP, the auditor, reviewed Nam Cheong financial results for the year ended December 31, 2016.

The auditor said: “We draw attention to Note 4 in the financial statements, which indicates that for the financial year ended 31 December 2016, the Group experienced a significant decrease in revenue and incurred a net loss of approximately RM42,771,000.”

Nam Cheong has blamed the revenue drop on deferments the deliveries of vessels that had been requested by several customers. The current downturn in the oil and gas industry may continue to add pressure to the Group’s financial performance and its operating cash, the company said in its yearly report.

Commenting further, the auditor said that as at 31 December 2016, the Group’s loans and borrowings that were classified as current amounted to RM948,720,000 of which RM278,566,000 pertained to medium term notes that are due for repayment on 28 August 2017.

“These amounts exceeded the Group’s cash and cash equivalents of RM162,618,000 as at 31 December 2016. As stated in Note 4, these events or conditions, along with other matters as set forth in the note, indicate that a material uncertainty exists that may cast significant doubt on the Group’s ability to continue as a going concern. Our opinion is not modified in respect of this matter.”

Here is a definition of “going concern” as found on Investopedia: “Going concern is an accounting term for a company that has the resources needed to continue to operate indefinitely until a company provides evidence to the contrary, and this term also refers to a company’s ability to make enough money to stay afloat or avoid bankruptcy. If a business is not a going concern, it means the company has gone bankrupt and its assets were liquidated.”

 

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