AsiaPhos issues profit warning for Q2; in talks with lender to extend loan repayment deadline

PHOSPHATE mining company AsiaPhos on Friday said that based on its preliminary assessment, it expects to report a net loss for Q2, compared to a net profit for the same quarter a year ago, mainly due to lower revenue from the decrease in P4 sold and higher cost of production of P4.

The group also recorded lower profits from the discontinued operations. Furthermore, the group has recorded an impairment loss on its property, plant and equipment and an allowance for doubtful trade receivable.

The company is in the process of finalising its unaudited results for Q2 2018, which will be announced by Aug 14, 2018.

Separately, it also said that its bank borrowings with Bohai Bank amounting to 24 million yuan (S$4.9 million) is due and payable on July 31, 2018.

Due to the stoppage of its P4 operations and the Sichuan government's unlawful expropriation of the group's mining and exploration rights, the bank has a contractual right (due to material adverse changes clauses) to demand the repayment of the bank loan before the due date.

Currently, the company's management is in discussion with Bohai Bank for a renewal and/or an extension of the deadline for the loan repayment.

"The group is in a net tangible asset position which means that the value of its assets exceeds the value of its liabilities. The value of the collaterals provided to Bohai bank exceeds the balance of the outstanding loan. However, delays in receiving the compensation from the Sichuan government for its unlawful expropriation of the group's mining and exploration rights, payments of legal and professional fees and retrenchment costs and other unfavourable market conditions have caused a liquidity issue for the group," it said.

"The group has not missed any payment of interest to Bohai Bank and its other lender," it added. It has also written to the Sichuan government to expedite the payment of compensation.

Its unit Mianzhu Norwest has also applied for bridging finance from the Deyang government which has set up a fund to help eligible companies facing liquidity issues. 

The ability of the company to continue as a going concern depends on the ability to generate profits and cash flows from its downstream operations and the renewal of the bank borrowings or other funding for its working capital requirements for the next twelve months, it said.