ADAMA Ltd.Asset Impairment Announcement
The Company and all members of its Board of Directors confirm that all the informationdisclosed herein is true, accurate, and complete with no false or misleading statementor material omission.
In accordance with the Accounting Standards for Business Enterprises, ADAMA Ltd.(hereinafter referred to as the “Company”), recorded a total of RMB 243 million(approximately $34 million) for the first nine months of 2024 in provisions for asset andcredit loss impairments. These provisions are mainly related to one-time impairment ofsome intangible assets and credit loss impairment of accounts receivables made duringthe ordinary course of the Company’s business, as provided herein.Overview and Financial Impact of Provision for the Asset ImpairmentsDuring the first nine months of 2024, the Company recorded provisions for asset andcredit loss impairments based on "Accounting Standards for Business Enterprises" andthe Company’s own applicable accounting policies.These provisions, charged to the total profits of the Company during the first nine monthsof the year amounted to RMB 243 million (approximately $34 million). Further details ofthe impairments are as follows:
Unit: ‘000 RMB
| Item | Amount |
| Intangible assets | 151,658 |
| Credit losses | 85,476 |
| Fixed assets and Construction in progress | 6,470 |
| Inventories | (881) |
| Total Asset impairments | 242,723 |
Basis and Explanation for Impairment of Intangible AssetsThe Company assesses at each balance sheet date whether there is any indication thatthe intangible assets with a finite useful life may be impaired, and if such indication exists,the Company calculates the recoverable amount of the asset. When the recoverableamount of an asset is less than its carrying amount, an impairment loss is expected to berecognized to reduce the carrying amount to the recoverable amount.Impairment of intangible assets amounting to RMB 152 million (approximately $21 million)was made in the first nine months of 2024. This was mainly due to the management'sstrategic decision to stop investing in the registrations related to products with low return
on investment, and hence to focus on the quality of business to achieve a better salesmix of higher margin products.
Basis and Explanation for Credit Impairment Losses and ReversalsThe Company recognizes an impairment provision which reflects its assessmentregarding the credit risk of accounts and other receivables on a lifetime expected creditloss basis. The examination for expected credit losses is performed using a modelincluding aging analysis and historical loss experience, and is adjusted taking intoaccount observable factors reflecting current and expected future economic conditions. Ifthere is objective evidence of a recovery in the value of receivables which can be relatedobjectively to an event occurring after the impairment was recognized, the previouslyrecognized impairment loss is reversed.The credit impairment losses provided in the first nine months of the year was amountedto RMB 85 million (approximately $12 million). Most of the impairment made was relatedto the accounts receivables in Brazil which was provided based on the evaluation of thecurrent and future financial position of the local customers.
Basis and Explanation for Impairment of Fixed Assets and Construction in ProgressThe Company assess at each balance sheet date whether there are any indications thatthe fixed assets and construction in progress may be impaired. If there is any indicationthat such assets may be impaired, recoverable amounts are estimated for such assets(recoverable amount is the higher between the assets’ fair value less costs to sell and thepresent value of the future cash flow estimated to be derived from the asset). If therecoverable amount is below the assets’ net cost recorded in the balance sheet, aprovision for impairment is made.
Basis and Explanation for Impairment of InventoriesInventories are measured at the lower of cost and net realizable value. If the net realizablevalue is below the cost of inventories, a provision for decline in value of inventories ismade. Net realizable value is the estimated selling price in the ordinary course of businessless the estimated costs of completion, the estimated costs necessary to make the saleand relevant taxes.
The impact of the impairment of fixed assets and construction in progress, and theimpairment of inventories in the first nine months of 2024 was immaterial to the overallfinancial statements.
Explanation on the Reasonableness of Asset ImpairmentsThe aforementioned provisions were mainly due to one-time impairment of someintangible assets and credit loss impairment of accounts receivables made during the
ordinary course of the Company’s business.Based on the current status of the assets, these impairments, some of which non-recurring, serve to correctly present the balance sheet of the Company, truly and fairlyreflects the company's financial situation, asset value and operating results, whilemeeting requirements of accounting standards and related policies.
It’s hereby announced.
Board of DirectorsADAMA LTD.October 31, 2024