TEMPORARY CLOSURE OF TWO BIOLOGICAL ASSETS
In previous years, the Group planted Paper Mulberry Tree in various provinces in China and Liquorices in Inner Mongolia. Unfortunately, there were consecutive climate disasters (such as drought, heavy snow rain, and heavy rain etc.) that caused a serious blow to the paper mulberry trees and a terribly low survival rate to the planted paper mulberry trees. The survival rate of young Liquorices was also terribly low caused by extreme cold and drought climate in Inner Mongolia. The Group made a large loss in previous years. These plantation estates need to be replanted again but plantation is labour intensive. Obviously, labour cost is much higher than previous years which make the plantation expenditures and maintenance cost much higher than previous years. In addition, the Group did not have any downstream production plants, the Group has been seeking appropriate business partner since year 2007 but has not be successful. The Group also considered that the increasingly unpredictable weather situation increase the business risk significantly. Therefore, due to commercial consideration to balance the investment expenditure, the business risk and return, the Group temporarily closed Paper Mulberry Trees and Liquorices projects and relevant provision or write-off was made during the year. The Group may restart these two biological assets projects when there is/are appropriate business partner(s) and the yield of plantation can be increased. |