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”), is expected to record a total of RMB 962million ($135 million) for the year of 2024 in provisions for asset and credit lossimpairments. It includes the impairments for the first nine months of 2024 the Companydisclosed on October 31, 2024 at www.cninfo.com.cn (Announcement No. 2024-48).These provisions are mainly related to one-time impairments of some fixed assets andintangible assets, impairment of inventories and credit loss impairment of accountsreceivables made during the ordinary course of the Company’s business, as providedherein.Overview and Financial Impact of Provision for the Asset ImpairmentsDuring the year, the Company is expected to record provisions for asset and credit lossimpairments based on "Accounting Standards for Business Enterprises" and theCompany’s own applicable accounting policies.These provisions, charged to the total profits of the Company during the year, areexpected amounting to RMB 962 million ($135 million).Further details of the impairments are as follows:
Unit: ‘000 RMB
| Item | Amount |
| Fixed assets | 538,671 |
| Inventories | 162,788 |
| Intangible assets | 161,125 |
| Credit losses | 99,713 |
| Total Asset impairments | 962,297 |
Basis and Explanation for Impairment of Fixed AssetsThe Company assess at each balance sheet date whether there are any indications thatthe fixed assets may be impaired. If there is any indication that such assets may beimpaired, recoverable amounts are estimated for such assets (recoverable amount is thehigher between the assets’ fair value less costs to sell and the present value of the futurecash flow estimated to be derived from the asset). If the recoverable amount is below the
assets’ net cost recorded in the balance sheet, a provision for impairment is made.In 2024, the Company is expected to provide impairments of around RMB 539 million($75 million) to fixed assets mainly relating to production lines with lower operationalefficiency, as part of the Fight Forward plan.
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.Inventory impairments are expected to reach approximately RMB 163 million ($23 million)for the full year 2024. The impairments were made mainly due to inventory managementaspects such as inventory expiration during the ordinary course of the Company’sbusiness.
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 around RMB 161 million ($23 million) isexpected to be provided for 2024. This is mainly due to the management's strategicdecision to stop investing in the registrations related to products with low return oninvestment, and hence to focus on the quality of business to achieve a better sales mixof 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 for the year is expected to be around RMB 100million ($14 million). Most of the impairment made was related to the accounts receivablesin Brazil which was provided based on the evaluation of the current and future financialposition of the local customers.
Explanation on the Reasonableness of Asset ImpairmentsThe aforementioned provisions were mainly due to impairments of some fixed assets andintangible assets, inventories and credit loss impairments of accounts receivables madeduring 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.
Other ExplanationsThe expected provisions for asset impairment is the result of the preliminary calculationof the financial department of the Company, without the audit of the accounting firm.Please refer to the audited 2024 Annual Report of the Company for final financial data.Investors are kindly reminded to pay attention to investment risks.
It’s hereby announced.
Board of DirectorsADAMA LTD.January 23, 2025