FGV HOLDINGS BERHAD | AUDITED FINANCIAL STATEMENTS 2023 103 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 (continued) Financial year ended 31 December 2023 (continued) d) FGV Kernel Products Sdn. Bhd. (“FGVKP”) (continued) The recoverable amount was determined using value-in-use calculation based on cash flow projections. The key assumption used for the value-in-use calculation were as follows: (i) Estimated selling price CPKO (per MT) RM3,079 - RM3,900 (ii) Estimated selling price PKE RM519 - RM618 (iii) Utilisation capacity (%) 35% (iv) Utilisation capacity (MT) 66,000 (v) Discount rate 10% e) Pontian United Plantation Berhad (“PUP Group”) The recoverable amount of the estates in PUP Group was determined based on the valuation report obtained from an external valuer using income approach (level 3 fair value computation) with cash flow projections covering a 25 year period. Based on the valuation, the recoverable amount of this estate was RM18,725,000, which resulted in the impairment loss of RM18,931,000 for property, plant and equipment. The impairment loss which was primarily driven by the reducing trend of CPO prices had been recognised as the Group’s impairment of non-financial assets and has been included as impairment loss within the Plantation Sector in the Group’s segment reporting (Note 18). The key assumptions used in the valuation were as follows: (i) CPO price (RM/MT) 2,915 - 3,600 (ii) PK price (RM/MT) 1,500 - 1,895 (iii) Cost of production (RM/Ha) 2,500 - 4,500 (iv) FFB yield (MT/Ha) 7 - 24.50 (v) Discount rate 9.5% f) MSM Sugar Refinery (Johor) Sdn. Bhd. (“MSM Johor”) MSM Johor has recorded continuous losses due to its low utilisation capacity since previous financial years, and this has been identified as indicator for impairment for the assets. The recoverable amount was determined using value in use calculation based on cash flow projection which is approved by the Board of Directors. The key assumptions of the projection are based on the 2024 to 2028 cash flow forecasts approved by the Directors and it covers a finite projection period of 25 years (2022: 27 years), based on the useful life of the plant. The recoverable amount of MSM Johor’s assets calculated based on value in use calculation was RM1,340 million exceeds the carrying value by RM165 million (2022: calculation was RM1,421 million exceeds the carrying value by RM282 million).
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