1MDB records RM665.4mil losses on higher finance costs

PETALING JAYA: 1Malaysia Development Bhd (1MDB) slipped into a net loss of RM665.36mil for its financial year ended March 31, 2014, despite seeing its revenue rising by more than 60% from the preceding year.

In a statement, it said the government investment fund attributed its losses to higher finance costs of RM2.4bil, compared with RM1.6bil in the preceding year, due in part to the group’s strategy of growing its asset base.

In the last two years, 1MDB had been recording profits largely due to revaluation of its assets which has more than offset the finance cost. For instance in 2013, 1MDB recorded a net profit of RM778.24mil, helped largely by property revaluation gains of RM2.7bil.

But this year it is not known if there was any revaluation gains or losses as the details of the accounts are not available yet from the Companies Commission of Malaysia (CCM).

According to the 1MDB’s accounts for the year ended March 31, 2014, revenue increased 64.3% to RM4.26bil from RM2.59bil in the corresponding period last year.

The much-awaited financial results, which were finally made available yesterday, showed that the Federal Government-owned fund posted a pre-tax loss of RM669.55mil in 2014, compared with a pre-tax profit of RM877.67mil in the previous year.

As of end-March 2014, 1MDB had total assets worth RM51.41bil, which represented an increase of RM6.75bil, or 15.1%, from RM44.66bil in the same period last year. In tandem with the increase in total assets, 1MDB’s total liabilities – both short and long term – rose 15.8% to RM48.97bil as of end-March 2014 from RM42.28bil previously.

In a related development, 1MDB stated that RM4bil of the US$2.3bil (RM7.2bil) that has been invested with a fund in Cayman Islands had been returned since the end of the financial year to March 2014.

“A dividend of RM435mil from these investments had been received and would be accounted for in the next financial year ending March 31, 2015,” the fund said in the statement late yesterday.

1MDB’s move to park its funds overseas has caused it to come under fire from various quarters. In 2012, US$2.3bil was placed in a fund in Cayman Islands and last year a further US$3bil was placed with fund managers outside the country.

The funds placed with a Segregated Portfolio Fund in Cayman Islands are managed by an outfit in Hong Kong called Bridge Partners.

1MDB managing director and chief executive officer Mohd Hazem Abd Rahman said the fund had maintained focus on growing its asset base and investment capacity.

“This has been driven by significant capital expenditure in the short term, which has resulted in an expected loss this financial year due to an increase in borrowings. But we are confident that the high quality nature of the assets acquired and projects secured will drive the business forward and ensure its growth in the long term,” he said.

1MDB said the major areas of focus for capital expenditure in the next financial year included projects secured within the energy division and the continued development of Tun Razak Exchange, Kuala Lumpur’s first dedicated financial district, within the group’s real estate division.

1MDB claimed its asset base was backed by strong reserves of cash and cash equivalents of RM16.7bil. The fund said that with the reserves its business was well-positioned to fund significant capital expenditure over the next 12 to 24 months and meet future funding requirements.

1MDB, whose auditor is Deloitte, only lodged its annual financial statement for 2014 with the CCM on Wednesday.

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