KUALA LUMPUR (Aug 3): Pestec International Bhd (KL:PESTEC) said its external auditor flagged potential troubles involving a RM50.31 million contract due to the Iran war.
Nexia SSY PLT had expressed “qualified opinion” in the audited financial statements of Pestec for the financial year ended March 31, 2026 (FY2026), according to an exchange filing. A qualified opinion means auditors conclude that a financial statement is mostly true, except for a specific matter.
While the auditors were able to obtain sufficient appropriate audit evidence on the stage of completion, existence and measurement of a project in Iraq, the conflict in the Middle East gave rise to “significant uncertainty exists over the recoverability of these amounts.”
In 2023, Pestech announced that its joint venture with China Energy Engineering Group Tianjin Electric Power Construction Co Ltd won a contract worth US$81.77 million (RM372.78 million) from the Iraqi government to build a substation in Baghdad.
The project has reached 86.73% completion but the widening war in the Middle East prevented planned site visits, leading to delays in project verification and the submission of progress billings to the customer, according to its latest annual report.
Further, Pestec did not make any impairment allowance for the contract assets.
“We were unable to obtain sufficient appropriate audit evidence as to the recoverability of the contract assets and whether any impairment allowance is required and, if so, the amount of such allowance, and there were no satisfactory alternative audit procedures that we could adopt,” said Nexia SSY.
To address the qualified opinion, Pestec said it will continue to review the recoverability of the contract assets, engage with project owners regularly, and monitor developments in the Middle East.
“The company expects that the matter may be resolved within the next six months, subject to improvements in the geopolitical situation in the Middle East, including the easing of regional tensions and the normalisation of conditions affecting the execution of the Iraq project,” Pestec added.