*ST Zhonghe: Restructuring failed to reach a consensus plan, multiple executives have left

On November 2nd, *ST Zhonghe (002070, SZ) held an investor briefing on the sale of major assets. Major shareholder Xu Jinhe confirmed that although no agreement was reached, the matter is continuing.

According to the third quarterly report released by the company on October 31, the company expects a net profit loss of 200 million to 250 million yuan in 2017. Once this year's loss, the listed company will suffer losses for three consecutive years. In accordance with relevant regulations, the company's stock will be suspended from listing for three consecutive years.

Recently, a number of senior executives, including the Secretary of the Board of Directors, resigned in succession. The once-popular Putian A-share listing "the first stock" is now tilted and stormy.

Expect to continue to lose money this year

As a former fame Putian "first unit", the public and the shares have been ranked in the global market share in the second cotton casual fabrics, short-listed textile and garment enterprises competitiveness of the country's top 500 enterprises and China top ten enterprises printing and dyeing industry, was once a One hundred key enterprises in Fujian Province and one hundred private enterprises in Fujian Province.

The company has been conducting capital operations frequently since 2012. The company has also transformed from traditional printing and dyeing textile enterprises into new energy fields for lithium batteries. According to the 2016 data, *ST Zhonghe's main business textile printing and dyeing only has a gross profit margin of 12%, while Zhonghe New Energy Jinxin Mining, which is engaged in new energy lithium mines and related businesses, has a consolidated gross profit margin of approximately 75% and strong demand.

However, along with the company's frequent capital operations, the problems of *ST public and real controllers have begun to emerge.

As early as 2014, *ST Zhonghe was ordered to correct the funds raised by the Fujian Securities Regulatory Bureau for violating the proceeds of 80 million yuan, and the three-year fundraising project was also terminated. At that time, the shares held by the real controller had been pledged and frozen (in 2014, the company’s actual controller Xu Jiancheng and Xu Jin and his father and son held 92,235,087 shares and 1,153,612,242 shares were all frozen and pledged).

The company's asset-liability ratio remains high. According to the annual report data, the company's asset-liability ratios from 2014 to 2016 were 68.96%, 71.87% and 73.71%, respectively, showing an upward trend year by year.

The real controller Xu’s father and son repeatedly climbed the list of untrustworthy, and some of the pledge shares were successively auctioned by the judiciary. According to statistics, from March 18, 2015 to April 28, 2017, *ST Zhonghe and the actual controller Xu Jinhe and Xu Jiancheng and his sons and sons reduced their holdings of Zhonghe shares 19 times, totaling 1.419 billion yuan.

At the same time, Zhonghe shares after entering the new energy industry failed to produce the expected transcripts. In 2015 and 2016, the losses were 147 million yuan and 0.48 billion yuan respectively. The output of Jinxin Mining is also much larger than expected. In 2016, it is expected to produce 60,000 to 80,000 tons of lithium concentrate, and actually produced more than 20,000 tons.

In the face of the question of whether investors will withdraw from the market, the company’s executives once publicly stated on the interactive platform, “Whether to withdraw from the market, the results of the 2017 annual audit report.”

According to the three quarterly report released on October 31, the company expects a loss of 200 million to 250 million yuan in 2017. * ST and public announcements, including the textile sector mainly due to full suspension, downtime losses and asset impairment losses increased losses; fails to debt servicing, a substantial increase in financial institutions liquidated damages; new mine environmental protection facilities still in trial operation In the fourth quarter, production time is shorter and production is expected to be lower.

Reorganization failed to reach a consensus

At the same time as the performance losses, the company's core asset Jinxin Mining will be continuously reported by the auction and the negative scandal of the chairman arrested for contract fraud. Although the listed company attempted to resolve the crisis by selling the textile sector business and transferring the controlling shareholding of the major shareholder, it was troubled by the debt disputes that were intended to be sold.

The company's stock has been suspended since May, and the asset restructuring plan is still uncertain.

On November 2nd, at the company's major asset sales network investor briefing session, the major shareholder Xu Jinhe confirmed that the major asset matters have not been agreed as scheduled. It said that the trading plan needs to consider the balance of interests of the company's creditors, trading parties, listed companies and all shareholders, and the negotiation difficulty and workload are enormous. But it insists that the matter is still going on.

It is worth noting that, as the restructuring event is difficult to advance, since July 14, 2017, the company's vice president Mo Hongbin, director Zhu Fuhui, and the company's director, vice president, board secretary Zhan Jinming have resigned. The announcement on November 2 showed that Zhang Ziyi, the company's vice president, also announced his resignation.

On November 2nd, the reporter of "Daily Economic News" put forward a number of questions including the current situation of the company's senior management team and the actual debt of the major shareholders at the above-mentioned investor briefing, but did not receive any reply as of the press release.