Multi-industry food company QAF is expecting to report a drop in profit before and after tax for the 1HFY2023 period ended June 30, compared to the corresponding period in the year before.

In a profit guidance filing, QAF says the drop in profit for the 1HFY2023 is based on a review to-date of the unaudited consolidated financial results for the half-year period, which included a periodic assessment of the recoverable amount of the group’s investment in its joint venture (JV) Gardenia Bakeries KL (GBKL).

QAF is expected to record a non-cash impairment of approximately $9.2 million in its 1HFY2023 results, which will be recognised as part of its share of JV profits or losses.

In April 2016, the group reduced its shareholding in GBKL from 70% to 50% to comply with Malaysian regulatory conditions. GBKL accordingly ceased to be a subsidiary of the group and became a 50/50 joint venture with QAF.

As required by Singapore’s financial reporting standards, QAF re-measured its remaining 50% investment in GBKL to its fair value as at March 31, 2016. An external valuer was appointed to perform this valuation which resulted in a net fair value uplift on identifiable assets of $28.9 million and goodwill of $25.0 million.

Under the shareholders’ agreement, the parties are to work towards a listing of GBKL by a specified date — which currently is scheduled for March 31, 2028. However, if a listing cannot be achieved by the specified date and there is no acquisition by one shareholder of the GBKL shares of the other, GBKL will be wound up and the shareholders’ agreement shall terminate.

See also: <a class='gtm_see_also_1_inread' style='text-decoration: underline;' href='/news/results/lhn-group-reports-strong-occupancy-rates-key-projects-3qfy2023-sees-steady-growth-rest?utm_source=website&utm_medium=article&utm_campaign=ONPAGESEO'>LHN Group reports strong occupancy rates for key projects in 3QFY2023; sees steady growth for rest of 2HFY2023</a>

However, it is possible for the JV to be extended by mutual agreement, with both parties having agreed to an extension of the listing target date from April 2026 to the current March 2028 date.

Driven by this non-cash impairment, QAF expects to report a drop in its profit for 1HFY2023, compared to the year-earlier period.

Notwithstanding the impairment, however, and barring unforeseen circumstances, QAF notes that it expects operating performance for 1HFY2023 to be “satisfactory”.

See also: <a class='gtm_see_also_2_inread' style='text-decoration: underline;' href='/news/results/southern-alliance-mining-guides-net-loss-fy2023?utm_source=website&utm_medium=article&utm_campaign=ONPAGESEO'>Southern Alliance Mining guides for net loss in FY2023</a>

QAF has advised that further details of its performance will be set out in its financial results for 1HFY2023, to be released in August.

Shares in QAF closed flat at 0.5 cents or 0.61% down at 81.5 cents on July 21.

QAF expects drop in profit for 1HFY2023 with Gardenia JV loss

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