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Zoomlion Says New Products Lift Sales as Letter Raises Doubt

Zoomlion Says New Products Lift Sales as Letter Raises Doubt
Zoomlion said last week that stock exchanges in Hong Kong and Shenzhen hadn’t visited the company for investigations following the report. Photographer: Nelson Ching/Bloomberg

Zoomlion Heavy Industry Science & Technology Co., seeking to boost investor confidence after an anonymous letter questioned its sales, said business surged last year after it offered new products and hired more people.

“We achieved growth in 2012 because some of our products gained market share.” Zhan Chunxin, chairman of China’s second-biggest construction-equipment maker, told reporters in Guangzhou on Jan. 11. “Zoomlion is a company with integrity.”

GPS tracking devices are installed on every machine sold and employees meet each client to ensure there are no fabricated sales contracts, said Hong Xiaoming, a vice president. Zoomlion is trying to allay concerns over its accounts as Chinese companies’ finances draw increased scrutiny after short seller Carson Block’s Muddy Waters LLC uncovered irregularities including those at now-bankrupt Sino-Forest Corp.

Zoomlion’s Hong Kong-listed shares rose 1.3 percent to HK$10.86 at close of trading. The city’s benchmark Hang Seng Index gained 0.6 percent. The company’s Shenzhen-traded stock advanced 3.9 percent.

“They are trying to ease investors’ concern,” said Vik Chopra, an analyst at Sun Hung Kai Financial Research in Hong Kong, who recommends selling the shares. “The next best step the company needs to do would be to get a third-party forensic accountant to investigate.”

Lighter Pumps

The company, based in Changsha, China, last year introduced lighter and longer concrete pumps with sections made from carbon fiber, Zhan said. Zoomlion had 31,018 workers at the end of June, 7.6 percent more than in 2011, according to the company’s annual and interim reports.

The company’s first-half profit jumped 21 percent in 2012 while larger Sany Heavy Industry Co. posted a 13 percent decline. Construction-equipment makers face a glut in China, where demand is slowing amid curbs on the property market.

Zoomlion didn’t offer customers “aggressive” financing to boost sales as the industry is highly competitive, company secretary Shen Ke said at the briefing. Leasing finance given to customers helped generate about 32 percent of sales in the first nine months of last year, said Hong, who heads the finance department. As much as 27 percent of sales came from offering installment options and 21 percent from mortgages, she said.

Unsigned Letter

Ming Pao Daily reported Jan. 8 it got the unsigned letter alleging Zoomlion’s sales are exaggerated, prompting the company to have its stock halted from trading. Copies of the note were also sent to Zoomlion and the Hong Kong Securities and Futures Commission, according to the report. The shares plunged the most in eight months when trading resumed the next day.

In statements to Shenzhen and Hong Kong stock exchanges, Zoomlion said it follows Chinese accounting rules and that its financial report for the six months ended June was prepared in compliance with international accounting standards.

Zoomlion said last week that stock exchanges in Hong Kong and Shenzhen hadn’t visited the company for investigations following the report. Hong Kong stock exchange declined to comment on Zoomlion’s statement and Shenzhen bourse didn’t reply to faxed questions from Bloomberg News.

Hong Kong-listed shares of Zoomlion rose 37 percent last year, compared with a 23 percent gain in the Hang Seng Index. Its Shenzhen-listed shares climbed 20 percent in 2012. Sany Heavy dropped 16 percent in Shanghai last year.

“Zoomlion has a solid financial position that can withstand any test,” Hong said. “Business in 2012 grew steadily. We have no clue how the letter came up with false figures and then accused us of exaggerating earnings.”

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