In a clarification announcement on Jan 22, the group elaborated that the errors that resulted in excess inventory and profits within the system include:
- Full system build production orders were incorrectly closed during the transfer of the production order to the Group’s Penang facility;
- Production orders within the ERP system for orders that were partially produced prior to transfer to the Group’s Penang facility were incorrectly closed without quantities being modified to reflect the actual number of modules and sub-assemblies produced;
- Data entry errors that resulted in incorrect amounts recorded for goods received
The company anticipates that the shortfall will negatively impact the group’s profitability for the year ending Dec 31, 2023.
The Securities Investors Association of Singapore (SIAS) has posed a series of questions to AEM Holdings (SGX:AWX
) , following the group’s announcement on Jan 14 regarding its shortfall in inventories.
To recap, the group noted that, based on preliminary estimates, its inventories as at Sept 30, 2023, are expected to be 5% to 7% lower than the figure reported on Nov 9, 2023. The shortfall is currently estimated to be between $17.9 million and $25.1 million.
The company has attributed the shortfall to human error in transactions with the group's ERP system during the migration of production from Singapore to Penang. According to the company's earlier announcement, the grand opening of the new 365,000 sq ft manufacturing plant in Penang took place on Jan 9, 2023.
Furthermore, the company clarified that these errors were not detected by the existing controls and processes that are in place. It plans to review its inventory and stock monitoring and tracking processes and systems.
