FGV Audited Financial Statements 2019

107 01 S E C T I O N NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2019 AUDITED FINANCIAL STATEMENTS 2019 20 PROPERTY, PLANT AND EQUIPMENT (CONTINUED) Significant impairment of property, plant and equipment Financial year ended 31 December 2019 a) A plan to rationalise the capacity of the three sugar refinery plants was embarked during the financial year to address losses incurred in the sugar business. This included the planned closure of the sugar refinery of a subsidiary of MSMH by June 2020, being the most uneconomically viable of the three plants. The key assumptions used in the valuation, based on value-in-use of the refinery are as follows: (i) Period of operations January 2020 up to June 2020 (ii) Selling price (domestics), RM/MT 2,500 (iii) Raw sugar price, US cents/lbs 13.5 (iv) Sales volume, MT’000 7,000 MT domestic refined sugar sales per month for the first 6-months of FY2020. Nil sales volume from July 2020 onwards. (v) Discount rate (post tax) 9% (vi) Forward exchange rate RM4.20/USD (vii) Separation costs RM16 million to be incurred in June 2020 As a result of the impairment assessment, the recoverable amount is nil based on the expected rationalisation plan. Hence, impairment loss of RM138,541,000 was recognised for property, plant and equipment, RM7,962,000 for right-of-use assets and RM179,000 for intangible assets (other than goodwill) which had been recorded as impairment of non-financial assets of the Group. The amount is included as part of the impairment loss in Sugar Sector in the Group’s segment reporting (Note 19). b) Felda Engineering Services Sdn. Bhd. (“FESS”) biogas plant continues to operate below capacity arising fromunscheduled outages and maintenance which has been identified as indicator for impairment for the asset. An assessment of recoverable amount has been prepared based on estimated future cash flows derived from the sales of electricity to its sole customer. Based on the impairment assessment, due to uncertainty in recovering the carrying value of the biogas plant, the Group had recognised the full impairment of RM20,780,000 for property, plant and equipment which had been recorded as impairment of non-financial assets of the Group. The amount is included as part of the impairment loss in Logistics and Others Sector in the Group’s segment reporting (Note 19).