FGV HOLDINGS BERHAD | AUDITED FINANCIAL STATEMENTS 2023 101 NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2023 19 PROPERTY, PLANT AND EQUIPMENT (CONTINUED) Significant impairment of property, plant and equipment Financial year ended 31 December 2023 a) FGV Plantations (Malaysia) Sdn. Bhd. (“FGVPM”) An updated impairment assessment was performed during the financial year due to continuing loss making on the rubber operations in FGVPM driven by reduction in planted rubber hectarage as well as lower overall average selling price. Based on the impairment assessment, the recoverable amount of the rubber plantation in FGVPM was RM40,871,000, which resulted in the impairment loss of RM24,765,000 for property, plant and equipment. The impairment loss was recognised as the Group’s impairment of non-financial assets and included as impairment loss within the Plantation Sector in the Group’s segment reporting (Note 18). The recoverable amount is determined using fair value through cost to sell calculation (Level 3 fair value calculation) using cash flow projections covering a 20 year period. The cash flow projection was based on 2024 approved financial budgets by the Board of Directors of the Company plus the projection for the remaining period reflective of the forecasted operational results. The key assumptions used in the valuation were as follows: (i) Planted rubber hectarage Up to 4,109 hectares (ii) Rubber price RM5.90 per kg to RM6.20 per kg (iii) Rubber yield 1,141 kg/ha to 1,250 kg/ha per annum (iv) Mature cost RM5.88 per kg to RM5.99 per kg (v) Discount rate 9.5% Reduction in planted mature rubber hectarage from the previous financial year arising from increased skilled labour shortages during the year. The sensitivity of the rubber plantation recoverable amount to changes in key assumptions is as follows: Key assumptions Sensitivity Recoverable amount lower by RM ‘000 Rubber price Reduce by RM0.25 cents per kg (22,802) Rubber yield Reduce by 100 kg/ha per annum (6,667) Mature cost per hectare Increase by 5% (6,189) b) PT. Citra Niaga Perkasa and PT. Temila Agro Abadi (“PT CNP” and “PT TAA”) During the financial year, Board of Directors had approved the divestment of the 95% equity stake in PT CNP and PT TAA, indirect subsidiaries of the Company due to continuing losses of the two Indonesian subsidiaries plantation, as a result of high production cost, low age profile and affected planting activities.
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