Suspected of violating laws and regulations was placed on file for investigation, and Zhongtai Chemical (002092. SZ) has finally landed.
Recently, Zhongtai Chemical announced that the company, the controlling shareholder and the relevant person in charge were punished with a "huge fine". Zhongtai Chemical was not only fined 5 million yuan, the company's shares were also suspended for 1 day on May 20, and resumed trading since the market opened on May 21, and the company's shares were changed to "ST Zhongtai".
For Zhongtai Chemical, whose performance and stock price have been sluggish for three years, it is undoubtedly worse. The reporter of Nandu Bay Finance Society noticed that the financial fraud case of Zhongtai Chemical also involved two sponsors and accounting firms, and there is no punishment yet.
In order to achieve the revenue target of the controlling shareholder, Zhongtai Chemical inflated its revenue by 4.2 billion yuan in two years
In March this year, Zhongtai Chemical and its controlling shareholder Xinjiang Zhongtai (Group) Co., Ltd. (hereinafter referred to as "Zhongtai Group") were investigated by the China Securities Regulatory Commission on suspicion of illegal information disclosure.
After nearly 2 months, on the evening of May 18, Zhongtai Chemical disclosed the results of the investigation and punishment of this matter. According to the "Administrative Penalty Decision", Zhongtai Chemical is mainly involved in two violations of laws and regulations: first, in order to complete the revenue target issued by the controlling shareholder Zhongtai Group, by accounting for the business that does not have control or is actually an agent according to the total amount method, the total inflated income in 2022 will be 4.248 billion yuan and the inflated cost will be 4.248 billion yuan, accounting for 7.60% and 7.75% of the total operating income and total operating cost disclosed in the 2022 annual report, respectively.
Second, Zhongtai Chemical did not disclose the related party transactions occupied by the controlling shareholder and its related parties in the 2021 and 2022 periodic reports and interim announcements. In 2021 and 2022, Zhongtai Chemical and its subsidiaries directly or through a third-party company had related party transactions with the controlling shareholder Zhongtai Group and its affiliates in the name of advance payment, return payment, collection and payment of freight, etc., with a total amount of 7.7 billion yuan.
The above-mentioned inflated revenue and costs, as well as the failure to disclose related party transactions, led to false records and major omissions in Zhongtai Chemical's 2021 and 2022 financial reports. In addition, it also led to the inaccurate data and false records of the corporate bonds such as "23 Xinhua 01" and "23 Xinhua K1" publicly issued by Zhongtai Chemical.
Will the sponsor and accounting firm be fined if the regulator imposes a huge fine?
Under the new "National Nine Articles", the regulatory authorities have strengthened the supervision of information disclosure of listed companies, among which financial fraud, capital occupation and other violations of laws and regulations have been focused on supervision. This time, the Xinjiang Securities Regulatory Bureau issued a "huge fine" to Zhongtai Chemical, Zhongtai Group and relevant responsible persons.
The Xinjiang Securities Regulatory Bureau decided to order Zhongtai Chemical to make corrections, give a warning, and impose a fine of 5 million yuan. In addition, Zhongtai Chemical shares have been suspended for 1 day since the market opened on May 20, and resumed trading since the market opened on May 21. At the time of resumption of trading, the company's shares were also subject to "other risk warnings", and the stock abbreviation was changed from "Zhongtai Chemical" to "ST Zhongtai", and the stock code remained unchanged. After the implementation of other risk warnings, the daily rise and fall of the company's stock trading is limited to 5%.
At the same time, Yang Jianghong, then chairman of Zhongtai Chemical, was fined 2.5 million yuan, Peng Jiangling, then financial director of Zhongtai Chemical, was fined 1.5 million yuan, and five other executives were fined between 500,000 and 600,000 yuan.
Among them, from November 2020 to September 2022, Liu Hong, then director and general manager of Zhongtai Chemical, was fined 600,000 yuan. Liu Hong is now the founder of another Xinjiang-listed state-owned company, Zhongji Health (000972. SZ).
Regarding the above-mentioned punishment, Liu Hongshen argued that he had performed his duties for a short time, trusted the audit institution, and did not know about the violations of laws and regulations. Moreover, during his tenure, he made many reports and reminders on the lack of independence of Zhongtai Chemical, and actively cooperated with the investigation.
However, the Xinjiang Securities Regulatory Bureau held that these reasons were not statutory exemptions, and the bureau had fully considered the internal governance of Zhongtai Chemical and Liu Hong's performance of duties when sentencing the penalty, so it did not adopt its defense opinions.
As the initiator of the financial fraud case of Zhongtai Chemical, Zhongtai Group naturally cannot escape punishment. The Xinjiang Securities Regulatory Bureau pointed out that Zhongtai Group, as the controlling shareholder of Zhongtai Chemical, organized and instructed the capital occupation of Zhongtai Chemical, resulting in the illegal information disclosure of major omissions in the listed company.
The Xinjiang Securities Regulatory Bureau ordered Zhongtai Group to make corrections, gave a warning, and imposed a fine of 5 million yuan. Gong Chunhua, then the chief financial officer of Zhongtai Group, was the other person directly responsible for organizing and instructing Zhongtai Chemical to carry out illegal information disclosure, and was given a warning and fined 2 million yuan.
The reporter of Nandu Bay Finance Society noticed that the sponsor of Zhongtai Chemical's 2021 non-public issuance of shares and listing project is Orient Securities Underwriting and Sponsorship Co., Ltd., and the continuous supervision period ends on December 31, 2022. In addition, in 2021 and 2022, the person responsible for the audit work of Zhongtai Chemical is ShineWing Zhonghe Certified Public Accountants (Special General Partnership).
Referring to the recent Jin Tongling financial fraud case, will these two institutions be fined together with Zhongtai Chemical? Do these two organizations have any statements on this matter? The reporter of Nandu Bay Finance Society asked the Xinjiang Securities Regulatory Bureau and the above two institutions about relevant issues, but has not received a response as of press time.
The stock price and performance continued to be sluggish, and the asset-liability ratio approached 60% last year
According to public information, Zhongtai Group is the largest state-owned enterprise in Xinjiang and the first state-owned enterprise in Xinjiang to enter the world's top 500. In July 2012, Zhongtai Group was established on the basis of Zhongtai Chemical, and in May 2021, it was reorganized into a state-owned capital investment company, and became a provincial state-owned enterprise with 95% of the shares held by the State-owned Assets Supervision and Administration Commission of the People's Government of Xinjiang Uygur Autonomous Region. Zhongtai Group is the controlling shareholder of Zhongtai Chemical, holding 25.44% of the latter's equity.
Zhongtai Chemical, formerly known as Xinjiang Chlor-Alkali Factory, is also a leading enterprise in the chlor-alkali industry, mainly producing four types of products: polyvinyl chloride resin (PVC), ion membrane caustic soda, viscose fiber and viscose yarn.
In 2021, Zhongtai Chemical once refreshed the historical record with its performance and stock price by virtue of the high prosperity of the industry. In the past three years, affected by the bottom of the industry cycle, Zhongtai Chemical's performance and stock price have continued to be sluggish.
According to the financial report, Zhongtai Chemical's operating income in 2023 will be about 37.118 billion yuan, a year-on-year decrease of 28.15%; The net profit loss attributable to the parent company was about 2.865 billion yuan, while the profit in the same period last year was 776 million yuan, which was the first annual net profit loss of Zhongtai Chemical in the past 20 years. In the first quarter of this year, the company's revenue was 7.78 billion yuan, a year-on-year decrease of 27.33%; The net profit loss attributable to the parent company was about 177 million yuan.
Changes in the net profit of Zhongtai Chemical in the past 5 years.
For the large loss, Zhongtai Chemical explained that affected by the industry cycle, the sales price of the company's main products has declined to varying degrees, coupled with the increase in asset impairment losses, the decline in the performance of associates, and the increase in investment losses, resulting in a decline in profitability.
Both companies are also under great financial pressure. As of the end of 2023, Zhongtai Group's total assets were 72.53 billion yuan, a decrease of 9.86% from the end of the previous year, and its total liabilities were 43.126 billion yuan. Among them, current liabilities were 70.628 billion yuan, mainly including short-term borrowings of 29.54 billion yuan, notes payable and accounts payable of 8.547 billion yuan.
In the same period, the company's monetary funds on the books were only 4.229 billion yuan, the asset-liability ratio reached 59.46%, and last year's financial expenses were as high as 1.166 billion yuan.
In the rating report issued in November 2023, United Credit pointed out that Zhongtai Group's revenue and profit are highly dependent on Zhongtai Chemical, and its operating performance is significantly affected by industry cycle fluctuations. The overall debt burden of Zhongtai Group is heavy, the proportion of short-term debt is high, and the trading business occupies a certain amount of capital.
In the secondary market, since the stage high in September 2021, Zhongtai Chemical's share price has fallen by more than 70%. As of the close of trading on May 17, Zhongtai Chemical closed at 4.93 yuan per share, with the latest market value of 12.769 billion yuan.
Written by: Nandu Bay Finance Society reporter Fang Shiqi
Occupying 8.4 billion yuan of funds in three years, the controlling shareholder of Zhongtai Chemical, a leading chemical company of 10 billion yuan, was investigated