On the evening of February 18, the Anhui Securities Regulatory Bureau issued the first administrative penalty decision in 2020, delisting the third share at face valueHuaxin Internationaland Shanghai Huaxin, the controlling shareholder, ordered corrections, issued a warning, and imposed a fine of 600,000 yuan.
An inflated profit of more than 400 million yuan makes credit disclosure illegal
According to the content of the decision, Huaxin International's illegal facts were mainly that it failed to disclose related transactions and external guarantee matters in accordance with regulations, inflated operating income and profits through fictional business; the controlling shareholder Shanghai Huaxin directed, arranged, and participated in the fictional business, which led to false records and major omissions in the annual report.
First, from 2015 to 2017, Huaxin International had sales and purchase related transactions with 25 affiliated companies, including Qingdao Free Trade Co., Ltd. and Hangzhou Xinhua Chemical International Trade Co., Ltd., with cumulative amounts of 350 million yuan, 52.3 yuan, and 8.21 billion yuan respectively, accounting for 13.07%, 180.45%, and 259.86% of the company's most recent audited net assets, respectively. The related trading companies mentioned above failed to be identified and disclosed in a timely manner, and additional confirmation was not made until 2019.
Second, Huaxin International inflated operating income by nearly 7.7 billion yuan and 7.3 billion yuan respectively in 2016 and 2017 through fictional factoring business and crude oil re-export trade business, and inflated total profit of 180 million yuan and 240 million yuan, accounting for 32% and 38% of total disclosed profits in the current period.
In terms of fictional factoring business, Huaxin International signed sales agreements with three companies including Yancheng Mofeng, Luoyang Mofa, and Ke Electronics through related parties as upstream suppliers. At the same time, the controlling shareholder Shanghai Huaxin and its affiliates signed purchase agreements as downstream customers of the above three companies. After the accounts receivable from the three companies were factored by Huaxin Factoring, a subsidiary of Huaxin International, by Huaxin International's subsidiary, downstream customers such as Shanghai Huaxin transferred money to the above three companies after the factoring period expired. The three companies received the funds and immediately transferred them to Huaxin Factoring, and the factoring business was closed. The above transactions do not involve actual delivery of goods, have no commercial substance, and constitute false transactions.
In terms of the fictional crude oil re-export trade business, Shanghai Huaxin, the controlling shareholder, signed crude oil trading commission agreements with three companies, including Ji Mou International, Huai Mou International, and Guang Mou International, designating Huaxin Natural Gas, a subsidiary of Huaxin International, as the upstream supplier of the three companies, while also arranging relevant parties as downstream customers for the three companies mentioned above. The upstream and downstream contracts were signed at the same time, and the funds to be transferred were arranged uniformly by Huaxin. The three companies paid for the upstream Huaxin Natural Gas immediately after receiving payment for the downstream purchase. The above transactions do not involve actual delivery of goods, have no commercial substance, and constitute false transactions.
It is worth mentioning that all upstream and downstream sales contracts, document signatures, etc. of the above false transactions are provided by Huaxin, and the “intermediate key companies” connecting upstream and downstream are only responsible for signing and sealing them.
Meanwhile, in February 2018, Huaxin International failed to comply with internal procedures to provide joint guarantees to the controlling shareholder Shanghai Huaxin and its related parties. The cumulative guarantee amount was 550 million yuan, accounting for 15.61% of the company's most recent audited net assets.
”Energy+Finance”The empire is destroyed
Although it was the third stock to be delisted at face value, Huaxin International also had a lot of popularity.
In 2004, Huaxing Chemical (predecessor of Huaxin International) entered the capital market. In 2013, Shanghai Huaxin quickly became the controlling shareholder by subscribing for non-publicly issued shares. Since then, Huaxin has embarked on the path of “rapid development” of Huaxin's international business adjustment and transformation. Rely on the controlling shareholderResource advantageBy divesting the original agrochemical business, carrying out industrial mergers and acquisitions, and constructing a “energy+finance” two-wing pattern, the company rapidly expanded its scale of operations, joined the 10 billion revenue club, and added to the high transfer plan introduced year after year to push stock prices up step by step. From the beginning of 2013 to June 2015, Huaxin International's total market capitalization rose from more than 3 billion yuan to nearly 50 billion yuan.
It is worth noting that Huaxin International Energy's business mainly invests abroad, and its financial business mainly relies on factoring in the petrochemical industry chain. Both businesses have high risks.
In 2017, the company's financial statements were issued audit opinions that could not be expressed by accounting firms, and most directors and executives were unable to guarantee the truthfulness, accuracy, and completeness of the annual report. Due to the large amount of overdue accounts receivable in factoring and re-export business, there is a serious shortage of monetary capital that the company can spend on its operating activities. According to data, in 2017, the company's accounts receivable balance was 4.471 billion yuan, and the balance of overdue accounts receivable was nearly 2.5 billion yuan. However, less than 20 million in bad debt provisions were taken into account; at the same time, current liabilities reached 3.3 billion yuan, overdue debts reached 800 million yuan, while monetary capital was only 300 million yuan.
In 2018, Huaxin International's financial crisis broke out in full swing. The scale of overdue accounts receivable from the energy trade business and financial business has further expanded. There is a shortage of overall capital, lack of liquidity, and the total volume of business has shrunk drastically. In that year, the company's revenue was 996 million yuan, down 94% from the previous year; the net profit was -1.2 billion yuan due to bad debt preparation and a sharp loss of 3,325 million yuan. Accountants believe that there is significant uncertainty about the continued operation of the company. In the first three quarters of 2019, the company's revenue was less than 100 million yuan.
Drastic changes in fundamentals have caused the company's stock price to decline. Since April 2018, Huaxin International's stock price has been falling all the way down. Although there have been slight fluctuations, it has remained below 2 yuan. On September 4, 2019, since the daily closing price of the company's stock was below the face value of the stock for 20 consecutive trading days, the Shenzhen Stock Exchange decided to terminate the listing of Huaxin International; on November 1, Huaxin International was delisted and will later fall back to the old third board.
It is worth mentioning that Huaxin International, the controlling shareholder, has been mired in a debt crisis due to many disputes over loans, sales contracts, and bond transactions. It has been listed as an untrustworthy executee many times, and its shares have also been frozen while waiting to be frozen.
Currently, due to the large number of account trusteeship units for some shareholders of the company and more equity pledges, judicial freezes, and waiting to be frozen, the initial registration process has not been processed as scheduled. It is expected that the listing and transfer period on the national equity transfer system will be extended until March 11, 2020.