SGX questions supply chain manager Abterra’s financial statements

The Company recorded a net exchange gain of S$4,195,000 for the quarter and SGX demands an explanation.

According to a release, the company refers to SGX queries on its unaudited financial statements and dividend announcement for the third quarter ended 30 September 2011.

The Board made the following clarifications with regard to the SGX queries:

a) Please provide details and clarify the reasons for the fair value gain/loss on the following:-

i) Fair value gain on financial assets at fair value through profit and loss of S$1,596,000; and

Response:

The Company has invested in a structured deposit which is denominated in United States dollars (“USD”) with an amount equivalent to S$36 million as at 30 September 2011. As USD appreciated against Singapore dollars (“SGD”) by 5.1% during the third quarter of 2011, the fair value of the financial assets has increased accordingly.

ii) Fair value loss on forward foreign exchange contract of S$1,699,000.

Response:

The Company has invested in a forward exchange contract which sells USD, with a notional amount of S$35 million. As mentioned above, as USD has appreciated against SGD by 5.1%, the fair value of the forward foreign exchange contract declined accordingly.

b) We note that the Company recorded a net exchange gain of S$4,195,000 for the quarter ended 30 September 2011 as compared to a net exchange loss of S$1,851,000 for the previous corresponding period. Please explain the reasons for the net exchange gain of S$4,195,000 and the change from a net exchange loss position to a net exchange gain position.

Response:

The exchange gains/losses of the Company were mainly arising from its Renminbi deposit. The Company has paid deposit of RMB445 million (equivalent to S$89.8 million as at 30 September 2011) for the proposed acquisition of 54.42% equity interest in Zuoquan Xinrui Metallurgy Mine Co. Ltd. in March and April 2011. During the second quarter of 2011, SGD appreciated against Renminbi by 1.0% and this result in exchange loss of S$0.9 million to the Company in relation to this deposit in the second quarter of 2011.

However, in the third quarter of 2011, SGD depreciated against Renminbi by 6.3% and an exchange gain of S$5.3 million was resulted from this deposit in the third quarter of 2011. As a result, the Company’s net exchange loss position was changed to a net exchange gain position.