If you can't see it there properly then you can go to :-
www.klse.com.my
Put your cursor on Listed Companies at the top,
from the drop down menu that appears, click Company Announcements,
On the left hand side, choose Annual Reports, then Current,
Just under Company Announcements on the main section in the middle, choose By Company, the the letter P, then from the list, Premium Nutrients and you should have all the annual reports.
When I noticed the differences for 2006 in the Premium Annual Reports in the related parties transactions and balances section I was quite flabbergasted. A 9.7m sale to Status Point does not appear in the actual 2006 report but appears in the 2007 report section for 2006. A 2.46m sale to Nalfin Realities Sdn Bhd does not appear in the actual 2006 report but appears in the 2007 report section for 2006.
Where where this transactions hiding in 2006? I looked for an announcement about this, looked at the notes to the accounts, read all the statements at the front of the 2007 annual report. No mention of how they can simply reclassify information for 2006? This is a listed company, they can't simply reclassify things and not even explain it. Even though it does not not materially affect the company at all, annual reports sent to shareholders should have a high standard of care. The guidelines are there for a reason mainly to provide accurate information to shareholders.
The auditors and the Audit committee should be ashamed of themselves. How can you wrongly classify 12.16m worth of transactions and not even mention it? It does not reflect well on the inner workings of Premium. I can only hope that this is an attempt by the new Managing Director and CEO to rectify the accounting shenanigans of the past but of course the main point is, THINGS LIKE THIS SHOULD NOT HAPPEN IN THE FIRST PLACE.
If any long suffering Premium shareholder would like to complain about this, they can print or type in on the word document on the link below and post or e-mail it to the address provided.
http://www.klse.com.my/website/bm/complaint.html
I mentioned in an earlier post that I would talk about inter-company transactions, well here it is.
Please note this is hypothetical only but not uncommon among organisations worldwide.
Say take the sales from Premum to Nalfin Realities Sdn Bhd of 2.466m made in 2006. The first question to ask is, why is a sale going throught Nalfin Realities rather than directly? If a sale goes throught Nalfin then Nalfin (not a manufacturing concern) will get the commission and price differentials of its further onward sale. In effect, Nalfin is pocketing to some extend, a profit that would have gone to Premium if it sold its product directly.
What/who is Nalfin Realities Sdn Bhd?
See Below
http://nalfin.com/index.htm
in the about us section
The income for the company is generated by way of Management fees for the financial and consultancy services provided, dividend income received from subsidiaries and associates and also income on financial facilities granted to subsidiaries and associates.
Management fee, consultancy? Shades of Seven M here.
and here
http://nalfin.com/structure.htm
A 100% owned subsidiary of NLFCS
Even thought Nalfin Realities is 100% owned by NLFCS, that does not mean any gains made by it go directly to NLFCS. Say above, again hypothetically, it bought some Palm Kernel Oil from Premium and sold it to Kewalram Oils or anybody else, this profit would first go to pay Nalfin's expenses, the salaries of its personnel and executives and if there was a personal comission for the trader arranging it, then a commission to that person. So you can see how this can shore up Nalfin's performance and give them a profit and of course pay the bills. Whatever is left goes to NLFCS. In this case the the purchase should have been done by a subsidiary Nalfin Trading Sdn Bhd which is only 76% owned by Nalfin Realities (who owns the rest?). So only 76% of any benefits after paying salaries, expenses and as mentioned above, management and consultancy fees would go first to Nalfin Realities, who would use it to pay's it's own cost and salaries, director's fee etc before passing on whatever remains to NLFCS.
I am painting a pretty standard scenario that I'm sure is not unfamiliar to some of us.
It says on the Nalfin Realities website that among others things that it sells estate supplies. Estate Supplies seems to be an all encompassing term. I assume it sells items to the estates under management by NLFCS, among others. Are these estates are getting the best deal for themselves?
The extract below also says that
http://vibforum.vcci.com.vn/opport.asp?post_id=551
Nalfin Realties Sdn. Bhd. has been involved in the animal feed business for more than 9 years. We are the sole distributor for our associate company PVOSB who are producing approximately 7500 MT monthly of Extraction Palm Kernel Pellet with oil content less than 3% and 18% protein.
Again, sole distributorship from Premium Vegetable's? Premium Vegetable has it's own marketing arm, why give sole distributorship to Nalfin Realities? Again, this would mean that any gains that would have gone to Premium Vegetable from selling Palm Kernel Pellet's gets filtered through Nalfin which takes a cut.
As I have explained, this kind of structure means that not all the benefits flow back to NLFCS. First, there is an opaqueness as NLFCS owns 100% of Nalfin Realities and Nalfin Realities in turn owns stakes in 7 subsidiaries, so all these sudsidiaries are technically indirect subsidiaries rather than direct subsidiaries of NLFCS. Because of this structure, Nalfin Realities calls the shots rather than NLFCS in all these subsidiaries and of course accounting wise it makes everything rather opaque compared to NLFCS owning direct stakes in all these companies.
And the flow of money stops at Nalfin Realities before flowing to NLFCS. Dividends etc of all these subsidiaries go through Nalfin Realities before getting to NLFCS. Say Nalfin Realities received 1m in profits, had to pay 0.5m as salaries etc, only the remainder would be appropriated by NLFCS.
A lot of these these subsidiaries seem to have the same directors and management team so each of these people will be receiving director's fee and salaries from all these subsidiaries. 7 salaries and director's fee. That may make sense or that may not.
I hope the next time you see inter-company transactions, that your hackles are raised.
Posts
No comments:
Post a Comment