Huis­han dairy de­nies fraud­u­lent fi­nan­cial dis­clo­sure

China Daily (Hong Kong) - - BUSINESS - By WU YONG in Shenyang wuy­ong@chi­

Lead­ing dairy firm China Huis­han de­nied fraud charges pub­lished by Muddy Wa­ter LLC, a due dili­gence based in­vest­ment firm that con­ducts in­ves­tiga­tive re­search on pub­lic com­pa­nies. Huis­han says that its op­er­a­tions are proper and that its fi­nan­cial re­port dis­clo­sure is true and ac­cu­rate.

The Hong Kong-listed dairy com­pany ranks No 1 in North- east China and No 5 in the na­tional mar­ket, with the 3.09 bil­lion yuan ($444 mil­lion) worth of liq­uid milk sales in fis­cal year 2016, ac­cord­ing to pub­lic in­for­ma­tion.

The main­land plant, which car­ried out a $1.3 bil­lion list­ing in Hong Kong in 2013, was sus­pended when down 2.14 per­cent on Fri­day morn­ing, fol­low­ing the re­port from the US-based short seller.

“Since at least 2014, the com­pany has re­ported fraud­u­lent prof­its largely based on bil­lion the lie that it is sub­stan­tially self-suf­fi­cient in pro­duc­ing al­falfa. We found over­whelm­ing ev­i­dence that Huis­han has long pur­chased sub­stan­tial quan­ti­ties of al­falfa from third par­ties, which gives us no doubt that Huis­han’s fi­nan- cials are fraud­u­lent,” ac­cord­ing to Muddy Wa­ter’s re­port.

Huis­han did not re­ply di­rectly to the charge, but a pub­li­ca­tion on Huis­han’s web­site says it has planted 3,780 hectares of al­falfa along Liaohe River and Linghe River. “This can ba­si­cally meet the de­mand of the com­pany. And the com­pany plans to ex­pand the al­falfa plant­ing as its busi­ness ex­pands.”

Chen Jiao, chief agri­cul­ture an­a­lyst of In­dus­trial Se­curi- ties, said the dairy in­dus­try suf­fered ex­cess prob­lems in the past two years, but is now on the verge of re­cov­ery. “Un­less there is a se­ri­ous prob­lem with the com­pany it­self, no one would go against the trend.”

Mod­ern Farm­ing, one of the most shorted dairy stocks in Hong Kong, rose over 60 per­cent dur­ing the past three months, which may force short sell­ers to re­turn bor­rowed shares at a higher price, ac­cord­ing to Chen.

money China Huis­han raised from list­ing in Hong Kong in 2013

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