Recently, the official website of the China Securities Regulatory Commission announced the "No. 1 fine" in 2022, and Shandong fertilizer enterprise Kingenta Ecological Engineering Group Co., Ltd. (hereinafter referred to as "Kingenta") was recruited.
Specifically, Kingenta was fined 7.55 million yuan for violations involving fictitious contracts, idling funds to inflate income, and 8 relevant responsible persons were fined together. Among them, 3 of the main responsible persons were banned from the market for 3 to 10 years.
In recent years, in order to safeguard the legitimate rights and interests of investors, the market supervision department has continued to increase supervision and investigation. Despite this, there are still enterprises in the securities market that continue to touch the "red line" of violations. As the former "Shandong fertilizer king", Jin Zhengda, this time it is even more surprising.
Qilu Financial Research Agency No. 178
Written by Wang Xinyi
Reviewer/Cheng Ruolan
In 4 years, the inflated revenue was 23.1 billion yuan
On January 20, 2022, Kingenta issued the Announcement on Receiving the Administrative Penalty Decision and the Market Prohibition Decision of the China Securities Regulatory Commission. The official website of the CSRC disclosed the administrative punishment decisions against Kim Zhengda, Wan Lianbu, Li Jiguo, Tang Yong, Cui Bin, Gao Yiwu, Yan Mingxiao, Zheng Shulin and Xu Hengjun.
According to the administrative penalty letter, Kingenta's illegal facts include inflating revenue and profits through fictitious trading business, failing to disclose related parties and related party transactions in accordance with regulations, and falsely recording three illegal facts in some asset and liability accounts.
Among them, in terms of inflating revenue and profits through fictitious trading business, from 2015 to the first half of 2018, Kingenta and some subsidiaries within the scope of its consolidated statements carried out fictitious trading business without physical circulation through fictitious contracts with their suppliers, customers and other external units, with a cumulative inflated income of 23.073 billion yuan, an inflated cost of 21.084 billion yuan, and a total inflated profit of 1.990 billion yuan.
As a result, the CSRC believes that the above-mentioned acts have led to false records in the 2015 Annual Report, 2016 Annual Report, 2017 Annual Report, 2018 Annual Report, 2019 Annual Report, 2018 Semi-Annual Report and 2019 Semi-Annual Report disclosed by Kingenta.
Source: Official website of the China Securities Regulatory Commission
At the same time, in terms of failing to disclose related parties and related party transactions and some assets as required, the disclosure of the related relationship between Kingenta and Noble (China) Agricultural Co., Ltd. was inaccurate; kingenta's disclosure of related capital transactions with NobleFeng was inaccurate; kingenta failed to disclose its related party relationship and related party transactions with Fuller (China) Biotechnology Co., Ltd. and Noble (China) Chemical Co., Ltd. as required.
In addition, there are still false records in most of Kingent's assets and liabilities, on the one hand, Kingenta falsely reduces the bills payable. The 2018 Annual Report falsely reduced bills payable and other receivables by 928 million yuan, and the 2019 Semi-Annual Report falsely reduced bills payable and other receivables by 1,028 million yuan.
On the other hand, Kingenta inflated the issuance of goods, the 2019 Annual Report inflated inventory by 3197.1517 million yuan, the total inflated profit was 141.8126 million yuan, and the inflated liabilities (other payables/salaries payable to employees) were 14.3584 million yuan.
To this end, the CSRC decided to impose a total fine of 7.55 million yuan on Kingenta and its actual controller and eight other relevant responsible persons, and at the same time imposed a ten-year market ban on Wan Lianbu, the then actual controller, chairman and general manager of Kingenta, a five-year market ban measure against Li Jiguo, then deputy general manager and financial director of Kingenta, and a three-year market ban on Tang Yong, then manager of Kingenta's financial department and director of the financial center.
The glory of yesteryear is gone
Kingenta made consecutive losses
According to public information, Kingenta was founded in 1998, was once a leading domestic private fertilizer enterprise, listed on the Shenzhen Stock Exchange in September 2010, mainly engaged in compound fertilizer, slow and controlled release fertilizer, water-soluble fertilizer, biological fertilizer, soil conditioner and other soil-required products and provides related planting industry solution services for growers.
It is worth mentioning that Kingenta compound fertilizer has ranked first in the industry's sales volume for 9 consecutive years. As China's largest producer of high-end fertilizers, Kingenta ranked 7th in the 2017 List of China's Top 100 Fertilizer Enterprises and Ranked First in Private Enterprises. The actual controller of the company, Wan Lianbu, has been listed on the 2015 Forbes Chinese Rich List and the 2019 Hurun Rich List, and was once called the "Fertilizer King".
The company's stock was once regarded as the "big white horse" of Kingenta, since 2010, the stock price began to rise from about 12 yuan, until 2015 reached a peak of 58.25 yuan, the market value of more than 53 billion yuan, ushered in its own highlight moment. During this period, Kingenta's net profit also rose from 314 million yuan to 1.112 billion yuan.
However, the good times did not last long. After reaching its highest point, Kingenta's stock price began to plummet all the way, falling to a trough of 1.02 yuan in 2020, a drop of more than 98%, and the market value evaporated by about 50 billion yuan. The company's net profit has taken a sharp turn for the worse, from 1.112 billion yuan in 2015 to 1.017 billion yuan in 2016 to 421 million yuan in 2018, and even the first loss since listing in 2019, with a net profit loss of 683 million yuan and a loss of 3.366 billion yuan in 2020.
Shortly thereafter, Kingenta received a notice of investigation from the CSRC on 14 September 2020 for suspected information disclosure violations. Later, on May 21, 2021, it was disclosed that the company received the "Prior Notice of Administrative Penalties and Market Prohibition" from the China Securities Regulatory Commission, and its three suspected illegal facts were also displayed in front of the public.
It is worth noting that the two bases of Shandong Linshu Headquarters and Heze, which rank among the top three companies in terms of production scale among all Kingenta companies, have been in a state of suspension since mid-to-late October 2021.
According to the 2021 annual performance forecast released by Jinzheng Da on January 27, 2021 is expected to have revenue of 9.1 billion to 10 billion yuan, and the net profit attributable to shareholders of listed companies will be a loss of 360 million yuan to 680 million yuan, an increase of 79.8% to 89.31% over the previous year.
Consecutive years of losses have allowed Kingenta to be subject to the final judgment of the capital market at any time.
Market supervision is becoming stricter
Kim Jong-tae's future is uncertain
Jin Zhengda, once a leading compound fertilizer enterprise in Shandong, is now under pressure from debt.
In order to maintain good financial data, Kingenta chose to whitewash the performance. This kind of fraud seriously violates the regulations and has a negative impact on the healthy development of the industry.
On January 17, 2022, Wan Lianbu has applied to resign as chairman, director, general manager and member of the strategy committee, audit committee, nomination committee, remuneration and appraisal committee of the company, and is still serving in the company after resigning from the above positions. At the same time, the directors of the company elected Gao Yiwu as the interim chairman and general manager.
Industry insiders said that after the penalty landed, it may cause a large number of investor claims and lawsuits. In the follow-up, if a large-scale investor claim really occurs, in addition to causing trouble to the company's operation and management and compensating for the direct losses caused to the company, the investor's large-scale litigation will naturally damage the company's market image, which will inevitably have a negative impact on the company's operation.
At the same time, in recent years, in response to financial fraud, market manipulation, insider trading and other violations of laws and regulations in the capital market, the state's heavy regulatory measures have landed one after another, and the regulatory authorities will continue to strictly crack down on the financial fraud of listed companies.
On December 31, 2020, a new delisting regulation pointed out that the financial fraud indicators of major violations, financial fraud for two consecutive years, the total amount of revenue, profit, net profit, and balance sheet falsely recorded amount reached more than 500 million yuan, and exceeded 50% of the total amount of the corresponding account in two years, which met the delisting requirements.
On 21 January 2022, the Supreme People's Court issued the Several Provisions on the Trial of Civil Compensation Cases for Infringement of Misrepresentation in the Securities Market, clarifying the civil compensation liability of relevant entities in situations such as financial fraud instigated by controlling shareholders and actual controller organizations, financial fraud by counterparties in mergers and acquisitions of listed companies, and financial fraud by business related parties of listed companies.
In this way, it not only increases the cost of enterprise violations of laws and regulations, deters enterprises from violating laws and regulations, but also indicates that the construction of the capital market infrastructure system is moving towards a new stage of continuous improvement.
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