The ownership of the "5,000 tons of glufosinate-ammonium project" has become an unavoidable problem for Huifeng Co., Ltd. (002496) for many years. Affected by this dispute, from 2020 to 2023, the company's financial report has been issued with a qualified opinion for 4 consecutive years.
On the evening of May 17, Huifeng Co., Ltd. disclosed that it replied to the 2023 annual report inquiry letter, which mentioned that Huifeng Co., Ltd. appealed to the court against the litigation dispute of Ruikai Chemical's "infringement of shareholders' interests", but was rejected by the court. Huifeng applied for a retrial and received the Notice of Case Filing served by the court in January 2024. Huifeng said, "There is uncertainty about the outcome of the judgment. On the evening of May 17, a reporter from Securities Times E Company called Hebei businessman Guo Junhui, who also said, "Our dispute has not yet been concluded." ”
It is worth noting that while the above-mentioned equity dispute has not yet been clarified, there is also an arbitration dispute between Huifeng and ADAMA.
The "5,000-ton glufosinate-ammonium project" is still an unsolved case
In June 2015, Huifeng Co., Ltd. announced that it would invest 269 million yuan in Ruikai Chemical with its own funds, and held 51% of the equity of Ruikai Chemical after the investment, and Guo Junhui, a businessman from Hebei, held 49% of the equity. Ruikai Chemical's main product is glufosinate-ammonium original drug, and Huifeng Co., Ltd. hoped to expand the company's share of the herbicide market at that time.
On April 21, 2016, Huifeng Co., Ltd. publicly issued convertible bonds totaling 845 million yuan, of which 5,000 tons of glufosinate-ammonium project is expected to invest 686 million yuan. On October 29, 2020, Huifeng Co., Ltd. announced that it intends to transfer 51% of the shares of its wholly-owned subsidiaries Kelinong and 1% of the shares of Shanghai Dubai to ADAMA, and the subject of this major asset sale includes a 5,000-ton glufosinate-ammonium project.
Huifeng announced at the time that "there is no major dispute involving the relevant assets". However, after the announcement was disclosed, Ruikai Chemical complained to the Shenzhen Stock Exchange that the 5,000 tons of glufosinate-ammonium project to be sold by Huifeng Co., Ltd. was actually invested and constructed by Ruikai Chemical, and the dispute between the two parties was made public.
The dispute between Huifeng and Guo Junhui is still ongoing, making it impossible for Huifeng to implement the production, operation and management of Ruikai Chemical, and the company has lost control of Ruikai Chemical since November 1, 2020, and transferred the investment funds to other non-current financial assets for reporting. In 2022, the company has recognized the relevant fair value change income of -62.4265 million yuan, but due to the limited audit procedures, the accountant cannot confirm the accuracy of the fair value change income. Regarding the dispute related to Ruikai Chemical, Huifeng Co., Ltd. appealed to the court, and the court rejected it. In the annual report inquiry letter issued by the Shenzhen Stock Exchange recently, Huifeng shares were required to explain that the lawsuit is still an important contingency and the reasonableness of the impact cannot be determined.
In response, Huifeng Co., Ltd. said that since November 2020, Ruikai Chemical has refused to provide financial statements for various reasons, and Huifeng Co., Ltd. has failed to communicate many times, filed a lawsuit on the grounds of shareholders' right to know, and received the "Civil Judgment" served by the court in January 2022, ruling that Ruikai Chemical must provide relevant accounting reports, accounting books and other information within the specified time.
Huifeng said that Ruikai Chemical has stopped production in June 2021, the shareholder conflict has not been resolved, and some lawsuits are still ongoing, coupled with its environmental protection and safety issues and backward production technology, resulting in high production costs, "It is unlikely that production will resume, and it will not be able to continue to operate in the future." "In the case of losing control of it, Huifeng shares based on all the financial information that can be obtained, the company held 51% of the equity value of Ruikai Chemical for accounting estimates, and confirmed the relevant fair value change income of -62.4265 million yuan.
Huifeng shares replied to the announcement that Huifeng shares appealed to the court against the litigation dispute of Ruikai Chemical's "infringement of shareholders' interests", but was rejected by the court. Huifeng applied for a retrial and received the Notice of Case Filing served by the court in January 2024. "There is uncertainty about the outcome of the judgment, and based on the principle of prudence, the company disclosed the lawsuit in its 2023 annual report." ”
ADAMA recovered more than 6,000 yuan from Huifeng shares
On May 13, Huifeng disclosed an arbitration matter, which was initiated by ADAMA. According to the Notice of Arbitration, on May 8, 2024, the Secretariat of the Shanghai International Economic and Trade Arbitration Commission received the arbitration application documents submitted by the claimant, ADAMA, with Huifeng as the respondent.
ADAMA requested that Huifeng be awarded a price adjustment payment of RMB64,535,800 and all costs of damages and attorneys' fees of US$150,000 for failure to pay the price adjustment payment on time. Huifeng said that because the arbitration case has not yet been heard, the impact on the company's current or future profits is still uncertain.
Huifeng did not disclose the circumstances of the arbitration, but on the evening of May 9, ADAMA disclosed an announcement on the arbitration matters, detailing the cause of the dispute.
Pursuant to the Supplemental Agreement to the Share Purchase Agreement signed between ADAMA and Huifeng on February 26, 2020, Huifeng Co., Ltd. commits its its subsidiary, Nongyi E-Commerce (Beijing) Co., Ltd. and its subsidiaries (hereinafter referred to as "Nongyi.com") to generate average annual gross profit ("Nongyi.com") gross profit ("Nongyi.com") generated by its business in 2021, 2022 and 2023 (the "Nongyi Network Gross Profit") ) should reach at least RMB 8.6 million (the "Rural One Network Business Benchmark"). If the gross profit of the business of the agricultural network fails to meet the benchmark of the business of the agricultural network, Huifeng shares shall pay the price to the company according to the relevant formula.
From 2021 to 2023, ADAMA Huifeng (Shanghai) generated a total gross profit of RMB10,907,100 and an average annual gross profit of RMB3,635,700. Huifeng shall pay a price adjustment payment of RMB64,535,800 to ADAMA.
On February 21, 2024, ADAMA issued a notice to Huifeng Co., Ltd. requesting Huifeng Co., Ltd. to pay the Company a price adjustment payment of RMB64,535,800 within five working days from February 18, 2024. As of the date of the announcement, Huifeng has not yet made a price adjustment payment to ADAMA. It was against this backdrop that ADAMA initiated arbitration proceedings against Huifeng shares.
The "protagonist" of the arbitration between Huifeng and Adama is the 81.41% stake in Nongyiwang, which Huifeng acquired in 2021. The counterparty of this transaction is Zhong Yurong, a limited partner of Yancheng Nongyi Partnership, who is the daughter of Zhong Hangen, the actual controller and chairman of Huifeng Shares. In this RMB135 million acquisition, Zhong Hangen promised Huifeng that the audited cumulative net profit of the target of the transaction from 2021 to 2025 would not be less than RMB100 million. If the audited cumulative net profit of Nongyi Beijing Company from 2021 to 2025 is less than 80% of the promised cumulative net profit, Zhong Hangen will fulfill the profit compensation obligation as agreed.
As of 2023, the audited net profit of 916,700 yuan during the performance commitment period of Nongyi Network has been realized, of which the net profit in 2021 is 8.0495 million yuan, the net profit in 2022 is -8.0038 million yuan, and the net profit in 2023 is 871,000 yuan.