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Jiangsu Wanlin Modern Logistics (603117.SH) changed ownership 3 years ago, and the current management team is still cleaning up the "old wounds" left by the previous controlling shareholder.

Recently, it has been learned by Lanjing News that due to a case of false sales suspicion, the current management of Jiangsu Wanlin Modern Logistics is targeting the former controlling shareholder Huang Baozhong.

According to the information provided by Jiangsu Wanlin Modern Logistics, from February 2019 to July 2021, Jiangsu Wanlin Modern Logistics' wholly-owned subsidiary, Jingjiang Yingli Port Limited (referred to as "Port Company"), accumulated payments of 4.866 million yuan to Shanghai Zhongbei International Trading Co., Ltd. (referred to as "Zhongbei Company"), but Jiangsu Wanlin Modern Logistics did not receive any goods.

Regarding this incident, both sides have their own statements. Jiangsu Wanlin Modern Logistics told Lanjing News reporters that this incident was carried out at the behest of Huang Baozhong. However, Huang Baozhong told Lanjing News reporters that Jiangsu Wanlin Modern Logistics was defaming him.

False sales suspicions lead to past entanglements.

Jiangsu Wanlin Modern Logistics was established in 2007, mainly engaged in timber import logistics business, and was listed on the Shanghai Stock Exchange in 2015. At the beginning of the listing, the company's controlling shareholder was Shanghai Huirui Industry Co., Ltd. (referred to as "Shanghai Huirui"), and the actual controller was Huang Baozhong.

In 2020, Wanlin Logistics began planning for a change of ownership. In July 2020, Guoqingcheng Surui Investment Co., Ltd., under Fan Jibo, acquired 7.83% of Wanlin Logistics' equity for 2.01 billion yuan and became the company's third largest shareholder.

In the same year, in August, Fan Jibo took the lead in entering the company's management. Fan Jibo and Hao Jianbin, nominated by Guoqingcheng Surui, entered the board of directors, with Fan Jibo being elected as the new chairman.

In April 2021, Shanghai Hurui and Guoqingcheng Surui, the controlling shareholders of Wanlin Logistics, respectively transferred their 6.74% and 7.83% company shares to another company under Fan Jibo named Guoqingcheng Borui Investment Partnership (Limited Partnership) for a total cost of 0.459 billion yuan. In this way, Guoqingcheng Borui's shareholding ratio reached 14.57%, becoming the company's controlling shareholder, and Fan Jibo became the new actual controller of the company.

In March 2023, there was another change in the controlling shareholder of Wanlin Logistics. Guoqingcheng Borui transferred its 11.79% company shares to Guoqingcheng Surui for 0.368 billion yuan, resulting in Guoqingcheng Surui becoming the controlling shareholder of the company, with Fan Jibo remaining the actual controller. Subsequently, Fan Jibo and Guoqingcheng Surui increased their holdings of the company's stock through block trades and other means. By the end of June 2024, Fan Jibo controlled a total of 26.51% of the company's shares. Fan Jibo had already utilized funds exceeding 0.767 billion yuan. Meanwhile, Huang Baozhong remained the third largest shareholder of the company, holding 4.73% of the shares.

After the change in ownership of Wanlin Logistics, the new management has been at loggerheads with Huang Baozhong, the original actual controller, over the problematic accounts he left behind. Recently, Blue Whale News learned that a dispute has reignited between the two parties due to a suspected false sales case.

The parties involved in this incident are Wanlin Logistics' wholly-owned subsidiary Ports Development Corporation and Zhongbei Company.

According to the information provided by Wanlin Logistics to Blue Whale News, Ports Development Corporation had signed 11 "Sales Contracts" with Zhongbei Company related to timber procurement. Under these contracts, from February 2019 to July 2021, Ports Development Corporation paid a total of 4.866 million yuan to Zhongbei Company for goods. However, in an internal audit, Wanlin Logistics discovered that these transactions were not genuine, and Ports Development Corporation and Wanlin Logistics did not receive any goods.

Who exactly orchestrated the signing of the above contracts? Why was this incident only known to the listed company nearly 3 years later?

Materials provided by Wanlin Logistics show that from June 2019 to July 2021, the port company signed 11 sales contracts with Zhongbei Company. The main operator of these transactions is Zhu Yong, General Manager of the Wanlin Logistics Finance Management Department and Financial Manager of the Port Company. Zhu Yong processed the above sales contracts under the pretext of "Wanlin Logistics needs to pay external fees" without real transactions or actual goods in and out.

In addition to Zhu Yong, Huang Zhihua, General Manager of the Port Company, and Zhu Yanjing, Deputy Manager of the Port Company's Finance Department, as well as many other port company employees, were also involved in the handling of this transaction and signed on the fund approval form. From the resumes, before the new management team invested in Wanlin Logistics in July 2020, the above employees had already been working at the port company.

According to Wanlin Logistics' announcement, due to Huang Baozhong's rich industry experience and resources, he continued to serve as the Honorary Chairman of the company after August 2020. Therefore, in the three transactions in September 2020, November 2020, and January 2021, Huang Baozhong also signed on the corresponding reimbursement documents.

Internal personnel of Wanlin Logistics told Blue Whale News that after August 2020, the control of Wanlin Logistics gradually shifted, but the company's business also went through a period of transition. During this period, some of the company's business still remained under Huang Baozhong's management, including the port company's related business. Although the new management team of Wanlin Logistics participated in the approval of several subsequent sales contracts, they were unaware of the lack of actual goods in and out in the relevant business.

The staff member stated that Wanlin Logistics discovered the situation this time because the new management team noticed abnormalities in the above documents after several approvals and initiated a self-inspection. Eventually, the relevant issues were discovered after an internal audit.

It is worth noting that Wanlin Logistics stated that in this incident, there was also a situation of personnel cross-appointments between Wanlin Logistics and Zhongbei Company. According to QCC, Zhang Qiang, the actual controller of Zhongbei Company, holds 1% of the shares of Hainan Beirui Investment Co., Ltd., and serves as a supervisor in that company. Meanwhile, Zhang Yong, the actual controller of Hainan Beirui, worked at Shanghai Mailin, a subsidiary of Wanlin Logistics, during the period when the aforementioned contracts were signed.

Therefore, Wanlin Logistics believes that in this incident, with the consent of the company's original controlling shareholder Huang Baozhong, Wanlin Logistics and Zhongbei Company colluded to fabricate false sales contracts to transfer funds of the listed company. According to the information provided by the company, on September 14th, the Xingang Garden Police Station of Jingjiang City Public Security Bureau has initiated criminal proceedings on this matter.

In response, Blue Whale News has repeatedly contacted the Economic Investigation Brigade of Jiangsu Taizhou Public Security Bureau and the Economic Investigation Detachment of Jingjiang Public Security Bureau to inquire about the case and its progress, but has not received a response as of the deadline. In addition, Blue Whale News also contacted Huang Baozhong for verification. Huang Baozhong did not provide much response, but stated that Wanlin Logistics' actions were defamatory, and the specific situation should be confirmed by the police.

The old and new actual controllers have been at odds for many years, and have even taken the matter to court.

From July 2020 to April 2021, within less than a year, Wanli Logistics changed ownership of control. However, as the new management gradually took control of Wanlin Logistics, the problems of the listed company gradually surfaced, and the contradictions between the new management and the original actual controller of the company, Huang Baozhong, continued to escalate.

Before the change of ownership of the listed company, Wanlin Logistics continued to be profitable. From 2018 to 2020, the company achieved operating income of 675 million yuan, 942 million yuan, and 941 million yuan respectively; achieving net income attributable to shareholders of the parent company of 104 million yuan, 98 million yuan, and 73 million yuan respectively. However, behind the continuous profitability, the company faced high receivables and tight liquidity.

The annual report shows that as of the end of 2020, Wanlin Logistics had accounts receivable and other receivables balances of 292 million yuan and 2.544 billion yuan respectively, totaling 50.88% of the company's total assets. At the same time, the company's cash balance was 195 million yuan, but the total of short-term borrowings and non-current liabilities due within one year amounted to a high 1.595 billion yuan.

In December 2020, the company changed its accounting firm, replacing the original Deloitte Touche Tohmatsu with Tianjian Certified Public Accountants.

During the 2021 annual audit, Tianjian found two major deficiencies in the company's internal controls, involving accounts receivable and subsidiary management issues. Therefore, an adverse audit report was issued on the company. This also led to the company being "tagged," with a shortened name change to "ST Wanlin."

In terms of accounts receivable, as of the end of 2021, Wanlin Logistics had significant amounts of long overdue receivables from trading agent business, totaling about 580 million yuan, with 322 million yuan of accounts receivable formed from coal agent business with Shandong Weishan Lake Dayun Coal and Coke Sales Co., Ltd. (referred to as 'Weishan Lake Dayun'). Due to this, the company made a bad debt provision of 266 million yuan during the year.

As early as 2013, Wanlin Logistics began cooperating with Weishan Lake Dayun in coal agent business. However, in 2017 and 2018, Weishan Lake Dayun was listed as a dishonest person subject to enforcement, but from then until 2021, the two parties still maintained business relations.

With the change in control of Wanlin Logistics, a rift suddenly emerged between the company and Weishan Lake Dayun. In December 2021, Weishan Lake Dayun sued Wanlin Logistics, demanding the listed company to return a loan of 85 million yuan. However, in September 2022, Weishan Lake Dayun withdrew the lawsuit. In March 2022, Wanlin Logistics counter-sued Weishan Lake Dayun, demanding the repayment of advance payment of 0.31 billion yuan. In September 2023, Wanlin Logistics won the first-instance lawsuit, but the court only supported Weishan Lake Dayun to return 0.141 billion yuan in prepayment. Therefore, the company does not accept the first-instance result and will continue the above.

From the Wanlin Logistics announcement, the company once tried to hold former actual controller Huang Baozhong accountable for the above events. In July 2022, the company filed a lawsuit against Huang Baozhong. Wanlin Logistics believes that during Huang Baozhong's tenure as chairman and actual controller, he neglected to collect debts from customers, allowing the company's losses to escalate, thus violating his diligence duty. Huang Baozhong also abused his powers as chairman and actual controller, instructing the company to make large payments even after the debtors were listed as dishonest executors. Therefore, Wanlin Logistics claimed economic losses of 0.1 billion yuan from Huang Baozhong. However, in September 2022, Wanlin Logistics withdrew the lawsuit.

In addition to the entanglements with Weishan Lake Dayun, Wanlin Logistics suffered a "severe loss" in a 2017 acquisition case. In 2017, Wanlin Logistics acquired 55% equity of Yulin International held by Xu Jie and Zou Qinfu for 0.293 billion yuan. The company owned controlling interests in four forestry companies in the Republic of Gabon under Yulin International.

Upon acquisition, Yulin International was profitable. From 2017 to 2019, the company recorded net profits of 0.051 billion Hong Kong dollars, 0.085 billion Hong Kong dollars, and 0.056 billion Hong Kong dollars respectively. However, after the performance commitment period, Yulin International's performance turned downward, recording a net loss of 0.07 billion yuan in 2021. As a result, the company made a provision for impairment of goodwill of 0.026 billion yuan for that year.

Furthermore, in order to import wood, Wanlin Logistics would prepay funds to its subsidiary Lituong Hong Kong under Yulin International. However, as the losses of Yulin International worsened, the aforementioned prepayments became difficult to recover. In November 2022, Wanlin Logistics sued Lituong Hong Kong, demanding the repayment of the prepaid funds and requiring Xu Jie and Zou Qinfu to assume joint liability for the above payments. By the end of 2023, the company's prepayments to Lituong Hong Kong and receivables from third parties amounted to 0.181 billion yuan.

In July 2023, the court ruled in favor of Wanlin Logistics, ordering Lituong Hong Kong to pay the arrears and interest for the same period, but dismissed the request for Xu Jie and Zou Qinfu to assume joint liability. However, by this time, Yulin International had been continuously making losses, and Lituong Hong Kong had no property available for execution. Against this backdrop, in order to reduce the company's operating burden, Wanlin Logistics transferred 55% of the equity of Yulin International to the controlling shareholder Qingcheng Bochen for a consideration of 0.051 billion yuan.

For Wanlin Logistics, winning this series of lawsuits did not help the company recover the rightful amounts. From 2021 to 2023, the company provisioned for asset impairment losses of 0.373 billion yuan, 0.531 billion yuan, and 0.293 billion yuan respectively. This has also led to the company continuously falling into losses in recent years.

From 2021 to 2023, Wanlin Logistics achieved operating revenues of 0.58 billion yuan, 0.446 billion yuan, and 0.388 billion yuan respectively; and net losses attributable to the parent company of 0.283 billion yuan, 0.598 billion yuan, and 0.228 billion yuan respectively. In the first half of 2024, the company's revenue further decreased to 0.15 billion yuan, however, during this period the company turned a profit, with net profit attributable to the parent company of 0.016 billion yuan.

The performance has turned losses around and after undergoing three years of internal rectification, in July of this year, Wanlin Logistics audit institution issued the "Internal Control Audit Report" with a standard unqualified opinion, and the company's internal control deficiencies have been rectified. As a result, the company has successfully taken off the hat and is now abbreviated as Wanlin Logistics.