omniture

China Zhongwang Resumes Trading Today

Firm Rebuttal Backed with Evidence Against False Allegations
China Zhongwang Holdings Limited
2015-08-13 07:00 3042

HONG KONG, Aug. 13, 2015 /PRNewswire/ -- China Zhongwang Holdings Limited ("China Zhongwang" or the "Company", together with its subsidiaries the "Group", stock code: 01333), the world's second largest industrial aluminium extrusion product developer and manufacturer, issued a clarification announcement and applied for resumption of trading today. The Company provided solid evidence to rebut against the false allegations made in a short selling report ("DA report") dated 30 July 2015 to restore market confidence.

Mr. Lu Changqing, Executive Director and Vice President of China Zhongwang, said, "We reprimand the anonymous short seller who irresponsibly released such a malicious report based on fictitious information against the Group. We strongly reprimand such acts which cause damages to investors. The Company will consider and take all the reasonable measures to protect investors' interests, and reserve the right to take legal action against the short selling organization. China Zhongwang has strictly adhered to listing rule requirements ever since its listing. Full disclosures as to its business and financial position have been made in a timely manner. External independent auditors have issued unqualified audit opinions of the Group's consolidated financial statements ever since listing. We have, in a bid to provide investors a clear picture of the situation, tried our very best to gather independent third party evidence to support the contents in our announcement, We would like to express our gratitude to each and every professional body for their assistance in the process of preparing the rebuttal announcement and gathering evidences. We would also like to highlight that China Zhongwang has consistently advocated business competition in a fair, disciplined and orderly manner, and believes that development with mutual benefits is the foundation for the steady growth of the industry."

In the latest announcement, China Zhongwang laid out third party facts and evidence. The main false allegations and responses are summarized as below (for details, please refer to the clarification announcement on the HKEx website):

False Allegations / Obvious Factual Errors

Facts and Responses by Zhongwang

1. High voltage power transmission lines were alleged to have not yet been connected, and therefore equipment installation and testing could not be performed at the Tianjin Plant.

The Government of Wuqing District of Tianjin has issued a letter, confirming that the construction of the transformer station of the Tianjin plant was completed by October 2014, and the transformer station started supplying electricity on 17 December 2014.

 

The construction and equipment installation of the first production line for aluminium plate has been completed, and the final stage equipment testing of the entire production line is currently being carried out. According to the current development, the commissioning of the Tianjin plan might be advanced.

2. Technology Centre and Research & Development Centre were said to be the same building.

Technology Centre and Research & Development Centre bear a close external appearance and both are located on the same road. Jones Lang LaSalle Cororate Appraisal and Advisory Limited, an independent property valuer made a site visit and has issued a report confirming that the two are different buildings.

 

The Group has obtained the land use rights certificate and the building ownership certificate of each of the Research & Development Centre and the Technology Centre.

 

Haiwen & Partners, an independent PRC legal advisor has provided supporting documents

3. The land in Yingkou was said to be zoned for commercial use and it is unlikely that the land could be used for a manufacturing operation, and it was undeveloped as at March 2015.

The land in Yingkou is zoned as industrial land.

 

The Management Committee of Liaoning (Yingkou) Coastal Industrial Base has issued a letter, confirming that the construction of the Yingkou plant commenced in 2012, and the Yingkou plant has been gradually put into operation since January 2015.Jones Lang LaSalle Corporate Appraisal and Advisory Limited and Haiwen & Partners have provided supporting documents

4. The report claimed on P.30 of the 2014 report that the Company shipped 63 tonnes of deep processed aluminium products.

The Company did not disclose such information in its 2014 annual report.

 

Overseas sales amounted to approx. 83,600 tonnes in 2014

5. At least 62.5% of the Company's revenue as disclosed since 2011 was said to be fraudulent.

Financial statements have been audited by external independent auditors who are among the big four international accounting firms through strict and prudent auditing procedures. Unqualified opinions have been issued every year since listing.

 

The Group's sales collection has been stable, with accounts receiving taking up a small percentage.

6. Chairman Liu's Family was said to have "cultivated a network of proxies and intermediaries out of China, and has used them to secretly set up entities and aluminium processing plants secretly that span the globe."

Apart from disclosures already made, the purported proxies, intermediaries and related entities in the DA report are independent of Chairman Liu and the Company. Five of the purported related entities are the Group's suppliers for aluminium ingots and aluminium billets and two of them are the Group's customers. Business dealings with these suppliers and customers are entered into on normal commercial terms in the ordinary course of business of the Group.

 

7. Export values declared to the customs by the alleged related companies were said to have been inflated to embezzle export VAT rebates.

The amount of export VAT rebates is related to the purchase price and the applicable tax rebate rate but is not affected by the export price. Corporations cannot inflate the export price in order to obtain more export VAT rebates. Such allegations show an ignorance of basic tax laws.

 

The relevant tax bureau has issued letters confirming that the two subsidiaries of the Group which have been engaged in export business have complied with the applicable laws in relation to the declaration of VAT tax rebate, have not been engaged in any non-compliance with the relevant tax laws and regulations.

8. The real price of the extrusion machine purchased by the Group was alleged to be about 37%-70% lower than the price it disclosed.

According to the valuation report issued by an independent third party valuer dated 28 January 2013, the value of large extrusion presses appreciated by about 4.71% compared with the book values. The allegation that the Group has overstated the purchase prices is unsubstantiated.

9. The land purchased by the Group in Yingkou, Panjin, and Daqing was said to have been pledged in order to obtain bank loans,

There is no land encumbrance annotation in the land use rights certificates for the Company's land in Yingkou, Panjin and Daqing, indicating that the land has not been pledged for loans.

10. The Company was alleged to have provided large amount of guarantees for bank loans advanced to related parties

As disclosed in its annual reports, the Company has never provided any guarantees to any person or entity outside the Group.

 

According to the basic credit information reports provided by the credit reference system of the People's Bank of China in 2015, and it is confirmed by the rlated banking insitutions, the Company has not provided any external security.

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About China Zhongwang Holdings Limited

China Zhongwang is the second largest industrial aluminium extrusion product developer and manufacturer in the world and the biggest one in Asia. It has, over the years, been focusing on the light-weight development of transportation, machinery and equipment and electric power engineering sectors through the provision of quality industrial aluminium extrusion products. It now has over 90 internationally advanced aluminium extrusion production lines including 21 production lines of large-scale aluminium extrusion presses of 75MN or above.

In addition, to further leverage its existing strengths in the industry, the Group is developing the high value-added aluminium flat rolled product project. With a total designed annual production capacity of 3 million tonnes, the project is scheduled for development in two phases. Phase I of the project with a planned annual production capacity of 1.8 million tonnes consists of two production lines. Plant construction and equipment installation for the first production line have been completed and the equipment testing of the entire production line at the Tianjin plant is being carried out and and is expected to be commissioned by the end of the year. This new business venture will not only enable the Group to further capitalize on its leading edge in aluminium alloy smelting and casting and product research and development, but also achieve synergies with its existing industrial aluminium extrusion and deep processing businesses by taking full advantage of their customer and market resources in related downstream application sectors.

For further information on the Group, please visit www.zhongwang.com

Source: China Zhongwang Holdings Limited
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