Joy Global Inc. (JOY), the world’s second-largest maker of mining equipment, refuted allegations made about its International Mining Machinery Holdings Ltd. unit and said it has a “high level of comfort” in the reported results of the business it bought in China last year.
“Joy Global has conducted numerous internal and external financial and operational audits and business reviews of IMM before, during and subsequent to the company’s acquisition in 2012,” Jim Sullivan, Milwaukee-based Joy Global’s chief financial officer, said yesterday in a telephone interview. “These audits and business reviews have not uncovered any fraudulent activity and have given management a high level of comfort that the internal controls within the business are sound and reported results are accurate.”
A report dated April 11 on the website of Anonymous Analytics said there was fraud at IMM before Joy Global completed its purchase of the company, and five of IMM’s six largest disclosed customers appeared to have been “shell entities or related parties controlled” by the unit’s insiders. There may be a risk of Joy taking a writedown on IMM, according to the unsigned report.
Sullivan said yesterday that Joy Global conducted its regular goodwill review at the end of fiscal 2012 and will go through the process again for the year through October. At the moment, the company sees no reason to believe there will be a goodwill charge, he said.
The distributors or sales agents listed in the report are “active and independent” customers of IMM, Sullivan said.
Sutherlin said in January the company is “not concerned with writedowns at this point” and tests and controls including a year-end audit confirm the accuracy of information from IMM.
Questions about IMM have been raised since Caterpillar Inc. (CAT), the world’s largest mining-equipment maker, said it uncovered false accounting at a Chinese unit. Caterpillar announced Jan. 18 it would take a $580 million writedown after discovering accounting “misconduct” at the Zhengzhou Siwei Mechanical & Electrical Manufacturing Co. unit of Chinese subsidiary ERA Mining Machinery Ltd. Former ERA directors Emory Williams and Li Rubo were founders of IMM.
Anonymous Analytics said in its report that while it doesn’t hold direct or indirect interests or positions in Joy Global, it can be assumed that contributors to the report and its clients have short positions in the stock or debt of the company.
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