Zoomlion Drops After Denying Report It Falsified Sales
Zoomlion (000157) Heavy Industry Science & Technology Co., China’s second-largest maker of construction equipment, fell to a 20-month low in Hong Kong trading after denying for a second time allegations it falsified sales.
Zoomlion dropped 5.4 percent to close at HK$7.49, the lowest since September 2011. The company yesterday said an article on Sina.com saying sales were improperly accounted for was “distorted” and “misleading.”
“The unsigned accusations reflected the vicious competition in the weak construction equipment market, and that investors are worrying vicious competition may persist,” Liu Rong, a Shenzhen-based analyst at China Merchants Securities, said in a phone interview. “The sales outlook for the company as well as the sector will remain weak in the first half.”
The company, 16.2 percent owned by the government of Hunan province, and bigger rival Sany Heavy Industry Co. (631) face a drop in orders as China’s slowing economic growth and government curbs on the property market sap demand. Zoomlion’s first-quarter profit plummeted 72 percent.
Auditors Sign Off
KPMG and one other auditor signed off on the company’s 2012 financial report, Zoomlion said in a Shenzhen stock exchange filing yesterday. The May 27 stock suspension, its second this year following accusations in media reports, after Sina.com’s publication of an article by the Xin Kuai Bao newspaper.
KPMG declined to comment, according to an e-mailed statement.
In a separate statement to the Hong Kong stock exchange yesterday, Zoomlion called the article’s allegations “false, groundless and misleading.”
The company’s Hong Kong-traded shares have lost 34 percent this year, compared with a 0.5 percent drop for the benchmark Hang Seng Index. Zoomlion shares in Shenzhen fell 2.5 percent to close at 7.11 yuan.
Zoomlion’s $600 million of 6.125 percent bonds due December 2022 were little changed at 93.5 cents on the dollar as of 5:10 p.m. in Hong Kong, according to Bloomberg prices. The securities slumped 0.8 cents to 93.5 cents yesterday, the lowest level since Feb. 6, the prices show.
In January, Zoomlion halted share trading in Hong Kong after Ming Pao Daily cited an unsigned letter accusing the company of exaggerating sales. The equipment maker has denied the allegations.
“If there’s anything wrong with the company, we should have seen some official allegation” from the stock exchanges since the Ming Pao report, said Victoria Li, a Hong Kong-based analyst at Barclays Plc. “Although there’s nothing new in this accusation, it raised market concerns again about further future anonymous allegations.”
China’s economic growth unexpectedly slowed to 7.7 percent in the first quarter, while remaining above the government’s full-year target of 7.5 percent.
Figures this month on fixed-asset investment and factory production missed forecasts and gauges of manufacturing and service industries declined. The economy expanded 7.8 percent in 2012, the slowest pace in 13 years.
Chinese companies’ finances have drawn increased attention after short-seller Carson Block’s Muddy Waters LLC uncovered irregularities including those at now-bankrupt Sino-Forest Corp. in 2011.
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