KUALA LUMPUR (June 30): Oil palm plantation company Rimbunan Sawit Bhd has proposed to undertake a capital reduction to cancel RM223.09 million of its issued share capital to offset accumulated losses.

In a filing with Bursa Malaysia on Friday (June 30), loss-making Rimbunan Sawit said the credit of RM223.09 million arising from the exercise will be used to set-off against the accumulated losses of the company, while the remaining balance, if any, will be credited to the retained earnings.

As at June 12, 2023, Rimbunan Sawit's issued share capital stood at RM614.6 million comprising 2.04 billion shares.

Rimbunan Sawit said the rationale for the proposed capital reduction is to accurately reflect the group’s financial position through eliminating its accumulated losses and to enhance its ability to declare and pay dividends out of its retained earnings in the future, as and when appropriate, when the group returns to profitability.

According to the group's filing, its accumulated losses as at March 31, 2023 stood at RM200.65 million at the company's level and RM196.18 million at the group level. After the proposed capital reduction, it would have a reduced accumulated loss of RM163,000 and retained profit of RM26.74 million.

The corporate exercise is subject to the approval of its shareholders at an extraordinary general meeting to be convened.

The exercise will not have any material effect on the group's consolidated earnings and earnings per share for the financial year ending Dec 31, 2023,  Rimbunan Sawit said.

Barring any unforeseen circumstances, the proposed capital reduction is expected to be completed in the fourth quarter of 2023. Maybank Investment Bank Bhd has been appointed as the principal adviser for the exercise.

Rimbunan Sawit recorded a net loss of RM17.38 million for the first quarter ended March 31, 2023 (1QFY2023) compared to a net profit of RM3.88 million a year earlier, on lower revenue mainly due to the large decrease in the average selling price of fresh fruit bunches, crude palm oil and palm kernel. Revenue for 1QFY2023 was RM104.84 million, down 35% from RM160.29 million a year earlier.

Rimbunan Sawit's last capital reduction exercise was in August 2020, when it cancelled RM192.53 million of its issued share capital.

Rimbunan Sawit shares closed unchanged at 14 sen on Friday, giving it a market capitalisation of RM285.84 million.