Independent auditor issues disclaimer of opinion on Sunvic Chemical's financial statements

THE independent auditor of Sunvic Chemical Holdings has issued a disclaimer of opinion on the group's financial statements for the financial year ended Dec 31, 2019.

The auditor, Foo Kon Tan LLP, likewise did not express an audit opinion on the group's financial statements for the financial year ended Dec 31, 2018.

Among other things, the auditor flagged discrepancies surrounding the veracity of corporate guarantees provided for loans amounting to 222.5 million yuan (S$45.3 million). The guarantees were reportedly issued by some of Sunvic Chemical's subsidiaries in China without the company's board's approval. Sunvic Chemical later announced that it had received legal claims for these sums.

However, Foo Kon Tan said that its legal counsel in China reported that one of the corporate guarantee contracts (for 180 million yuan) did not exist; there were also no legal demands made in respect of the contract.

The auditor also noted material uncertainties which may cast "significant doubt" over the group's ability to continue as a going concern.

These included the group's net current liabilities of 32 million yuan as at end-Dec 2019. Sunvic Chemical also recorded cash outflow from operating activities of 271.3 million yuan. However, it had only 7.8 million yuan in cash and cash equivalents as at end-December 2019.

The mainboard-listed company is on the Singapore Exchange's watch-list. Trading in Sunvic Chemical shares has been suspended since Jan 14 upon the company's request. The counter last traded at 2.2 Singapore cents.