Follow-up to "scallop escape": The former chairman of Zhangzidao was sentenced to 15 years in prison, and the state-owned assets were unable to save his life

Interface News Reporter | Yin Jingfei

Interface News Editor |

On December 29, Zhangzidao (002069. SZ) shares closed up 2.51% at 4.49 yuan per share, with a market value of about 3.2 billion yuan and a price-earnings ratio of 122 times.

On December 28, the Supreme People's Procuratorate released the 2023 financial procuratorial work case examples, including the case of "Zhangzidao" illegal disclosure of important information.

The incident of scallops "escaping" many times has shocked A-shares, and the real performance of Zhangzidao has also been exposed to the public. Although the Dalian State-owned Assets Supervision and Administration Commission (SASAC) has taken over the situation, it is difficult to salvage its declining performance, and the company's current debt ratio is high, and it has borrowed new debts to pay off old debts all year round, and has repeatedly sold its property in order to survive.

Scallops "fled" four times, and the former chairman was sentenced to 15 years

On December 28, the Supreme People's Procuratorate held a press conference on "giving full play to the role of procuratorial functions and serving to ensure high-quality financial development in accordance with the law", and released the examples of financial procuratorial work cases in 2023, including the case of illegal disclosure of important information in "Zhangzidao".

Looking back on the past, the "escape" incident of Zhangzidao scallops has refreshed the three views of A-share investors more than once. From 2014 to 2021, Zhangzidao scallops fled 4 times, died en masse once, and suddenly degraded once. In terms of fleeing alone, Zhangzidao said in 2014 that the company suffered a loss of 1.189 billion yuan due to the scallops' "escape", in 2017, the scallops "escaped" again, causing the company to lose 723 million yuan that year, and in 2019, the scallops "fled" for the third time, causing the company to lose 392 million yuan again.

It was later discovered that in 2016, in order to avoid the company being suspended from listing due to losses for three consecutive years, Wu Hougang, the former chairman and president of Zhangzidao Company, instructed the company's personnel to make a false "Record Form for Shellfish Harvesting at the End of the Month", reduce the area of Ezo scallop fishing to reduce operating costs, and reduce the scallops that no longer exist in some sea areas should be written off instead of written off, and the non-operating expenses should be falsely reduced. The "2016 Annual Report" publicly disclosed by Zhangzidao Company inflated profits by more than 130 million yuan, accounting for 158.11% of the total disclosed profits in the current period.

From the end of 2017 to the beginning of 2018, in order to be able to re-sow scallop seedlings in the concealed areas that had been harvested in 2016 but were not recorded, Wu Hougang instructed the company's personnel to set up additional sampling points in the concealed sea areas, fabricate false news about the death of scallops, and falsely write off and reduce the value of scallops in the harvested sea areas, and the relevant personnel also inflated the fishing area and operating costs to write off the inflated profits in 2016. The "2017 Annual Report" publicly disclosed by Zhangzidao Company reduced its profits by more than 278 million yuan, accounting for 38.57% of the total disclosed profits in the current period.

From February 2018 to June 2020, Wu Hougang changed the implementation plan of the National Marine Ranch Demonstration Zone Project in the sea area of Dalian Zhangzidao Group without authorization, and instructed others to fabricate false materials to apply for a total of more than 2,400 yuan in national artificial reef construction subsidies. In addition, Wu Hougang and others also had criminal facts such as collusion in bidding, bribery of non-state functionaries, and bribery of non-state functionaries.

On December 28, 2023, the Supreme People's Procuratorate disclosed the case of illegal disclosure of important information in Zhangzidao, and the former chairman was sentenced to 15 years in prison.

State-owned assets are in charge of their lives, and they sell their property to survive

After the scallops fled many times, it was difficult for Zhangzidao to get out of the quagmire of losses.

On April 15, 2022, Dalian State-owned Assets Supervision and Administration Commission became the owner. In March 2022, Dalian Salt Chemical Group Co., Ltd. (hereinafter referred to as "Salt Chemical Group"), a subsidiary of Dalian state-owned assets, bid for 15.46% of Zhangzidao's shares for 343 million yuan, becoming the company's new largest shareholder. In July of the same year, the Yanhua Group and the Changhai County Zhangzidao Investment and Development Center entrusted all the voting rights of the Zhangzidao shares held by both parties to Dalian State-owned Capital Management and Operation Co., Ltd., which became the controlling shareholder of Zhangzidao, and the Dalian State-owned Assets Supervision and Administration Commission became the actual controller of the company.

獐子岛扣非后归母净利，图源：choice

After the state-owned assets became the owner, Zhangzidao's performance seems to have improved.

The performance in 2023 has picked up. In the first three quarters of 2023, the operating income was 1.281 billion yuan, a year-on-year decrease of 15.51, the net profit was 24.8147 million yuan, a year-on-year increase of 833%, and the non-net profit was 19.3105 million yuan, a year-on-year turnaround.

However, as of the end of the third quarter of 2023, the company's debt ratio was as high as 93.86%, with a total debt of 2.257 billion yuan, of which short-term borrowings were as high as 1.766 billion yuan, and the monetary funds on the account were only 557 million yuan.

Jiemian News also found that the company is constantly borrowing new debts to pay off old debts. In 2022, the current period of 2022 obtained borrowings of up to 1.689 billion yuan, while repaying debts of 1.732 billion yuan; In the first three quarters of 2023, the borrowings obtained reached 1.912 billion yuan, and the debt repayment in the same period was as high as 1.923 billion yuan.

In the past, the company's performance losses narrowed, and the situation of turning losses into profits was also another reason. For the past three years, Zhangzidao has been selling its property to make ends meet.

On December 13, 2023, Zhangzidao announced that it intends to sell some of its assets for 102 million yuan, and if it can be successfully transferred in 2024, it is expected to increase profits by 90 million yuan.

In July 2022, Zhangzidao transferred its housing (structure) buildings, inventory, equipment and sea area use rights located in Wubaodao Village, Xiaochangshan Island Town, Changhai County, with a transaction consideration of 82.7214 million yuan and an increase in net profit of about 24 million yuan. It is worth noting that in 2022, Zhangzidao will have a positive net profit attributable to the parent company, but a negative net profit after deducting non-profits. In the current period, the company's net profit attributable to the parent company was 3.935 million yuan, a year-on-year decrease of 46%, and the net profit attributable to the parent company after deducting non-profit was a loss of 32 million yuan.

In December 2021, Zhangzidao sold the relevant assets of Zhuanghe Branch of Zhangzidao Group Co., Ltd. at a transaction price of 95 million yuan, increasing net profit by about 70 million yuan. It is worth noting that in 2021, the company's net profit attributable to the parent company will be 70 million yuan, but the net profit attributable to the parent company will be 103 million yuan after deducting non-profits.

Will the scallops of Zhangzidao stay in the water honestly in the future? As of the end of September 2023, the number of shareholders of the company will exceed 40,000.