Yongnam gives notice of three years of losses; auditor notes material uncertainty over ability to continue as going concern

YONGNAM Holdings gave notice of three consecutive years of losses in a regulatory filing on Wednesday, while its independent auditor also noted material uncertainty over the steel fabricator's ability to continue as a going concern.

As at July 14, Yongnam's latest six-month average daily market capitalisation was S$43.3 million.

An issuer is placed on the Singapore Exchange's watch-list if it records pre-tax losses for the three most recently completed consecutive financial years and has an average daily market capitalisation of less than S$40 million over the past six months.

Yongnam's auditors, Ernst & Young, issued an unmodified opinion on the group's audited financial statements for the year ended Dec 31. They drew attention to the group's S$77.8 million loss for the year, and net current liabilities of S$129.5 million for the group and S$12.6 million for the company.

"In addition, the group has also breached certain financial covenants in relation to its transferable term loan borrowings as of that date. The group's operations are affected by work stoppages caused by Covid-19 pandemic," said the auditor.

The above factors indicate material uncertainty which may cast significant doubt about the group's and company's ability to continue as a going concern, it added.

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The auditor also noted that as disclosed in the financial statements, Yongnam's ability to continue as a going concern and meet its financial obligations depends on its ability to generate cash flow through operations and scrapping idle steel beams and columns, as well as on continued support from lenders and bond holders.

Yongnam's ability could be impaired if significant project delays occur, or market demand for scrap steel changes for the worse, it added. Its opinion remains unqualified.