Recently, Kedi Dairy released its 2019 semi-annual report, which was first questioned by three independent directors and then received an inquiry letter from the SME Board Management Department of the Shenzhen Stock Exchange. Kedi Dairy has drawn high government attention due to unpaid milk payments and has received multiple inquiry letters from the Shenzhen Stock Exchange. Its recent 2019 interim financial report has also triggered significant market volatility and skepticism. Despite reporting normal operations, a 22.71% increase in net profit compared to the same period last year, and 1.75 billion yuan in book cash, the company still failed to repay the second installment of milk payments to dairy farmers on time, claiming it had no funds to pay. In response, Kedi Dairy received another inquiry letter from the SME Exchange regarding its 2019 semi-annual report.
Inquiry Letter for the 2019 Semi-annual Report On September 5, the SME Board Management Department stated that during its review of Kedi Dairy's 2019 semi-annual report, it noted that the company's monetary fund balance was 1.753 billion yuan, but it failed to repay dairy farmers' milk payments on time. Additionally, notes receivable increased by 724% from the beginning of the period; short-term borrowings stood at 1.159 billion yuan; and cash paid for purchasing goods and receiving services decreased by 57% year-on-year, among other unclear situations. Specifically, as of June 30, 2019, Kedi Dairy's monetary fund balance was 1.753 billion yuan. According to media reports, as of August 31, 2019, the company failed to pay the milk payments promised to dairy farmers on time. Please provide supplementary explanations: the balance, location, and type of monetary funds, and whether there are any restrictions on the rights to use these funds, such as pledges, mortgages, or freezes; whether any bank accounts are frozen; the reasons for failing to repay dairy farmers despite ample book cash; and whether, after the reporting period, the company's monetary funds have been misappropriated by the controlling shareholder or its related parties. As of August 16, 2019, Kedi Dairy's bank deposits were mainly held at China Construction Bank Beijing Yong'an Sub-branch and Hangzhou Xiaoshan Sub-branch, with amounts of 840 million yuan and 720 million yuan, respectively. Please explain the reasons and rationality for holding major bank deposits in non-primary production and operation areas.
As of June 30, 2019, Kedi Dairy's notes receivable balance was 159 million yuan, an increase of 724% from the beginning of the period. Please provide supplementary explanations: combined with changes in sales collection models, explain the reasons and rationality for the significant increase in notes receivable. Classify by issuing company, list the names, amounts, proportions of total notes receivable, related party relationships, and the solvency of the top five issuers. As of now, the collection status of notes receivable, and the basis and rationality for not making provision for impairment on notes receivable.
As of June 30, 2019, the company's short-term borrowings balance was 1.159 billion yuan. Please provide supplementary explanations: as of the date of reply, the specific details of short-term borrowings, including but not limited to balance, lending bank, start date, maturity date, and use of funds. Whether there are any overdue short-term borrowings that cannot be repaid; the company's subsequent repayment plans and financing plans for short-term borrowings.
From January to June 2019, the parent company's cash paid for purchasing goods and receiving services was 288 million yuan, a decrease of 375 million yuan from the same period last year, down 57%; as of June 30, 2019, the parent company's accounts payable balance was 245 million yuan, an increase of 94 million yuan from the beginning of the period, up 63%. Please provide supplementary explanations: combined with the company's business model, explain the reasons for the significant decrease in cash paid for purchasing goods and receiving services during the reporting period compared to the same period last year. Combined with internal purchase and sales transactions and amounts, explain the reasons and rationality for the increase in accounts payable being much smaller than the decrease in cash paid, and list the reconciliation relationship with accounts payable, prepayments, and other accounts. Please list the names, sales amounts, sales proportions, and related party relationships of the top five sales customers, and whether there have been significant changes compared to the previous year, explaining the reasons and specific circumstances. The SME Board Management Department required Kedi Dairy to submit the relevant explanatory materials to the Shenzhen Stock Exchange and disclose them by September 12, 2019, while also copying them to the Listed Company Supervision Division of the Henan Securities Regulatory Bureau. It was not until the final reply date of September 12 that Kedi Dairy issued an announcement to postpone its reply to the inquiry letter, stating that because the company was actively cooperating with regulatory investigations and the reply required intermediary institutions to issue verification opinions, the reply work had not been completed. To ensure a thorough reply, the company applied to the Shenzhen Stock Exchange to postpone the reply until September 20, 2019.
Kedi Dairy Has Received Multiple Inquiries in a Short Period It is reported that after the July incident of owing milk payments to dairy farmers became widely known in the industry, the listed company received high attention from the stock exchange and the securities regulatory bureau, and has received multiple inquiry letters. On August 3 and 5, the SME Board Company Management Department issued two attention letters to Kedi Dairy, requiring it to explain the situation of milk payments owed to dairy farmers, the company's monetary funds, contract disputes, the risk of the controlling shareholder Kedi Group's pledged shares, and the government's assistance in resolving the stock pledge risk of Kedi Group. On the evening of August 16, Kedi Dairy replied to the attention letters, stating that the company owed a total of 113 million yuan in milk payments. According to the contract, the aging of milk payments was 2 months, with 72 million yuan in normal payments within 2 months, and the remaining 41 million yuan overdue. Regarding the reasons for the overdue milk payments, Kedi Dairy believed that the main reason was that some dairy farmers did not deliver milk according to the agreed plan, delivering less in peak seasons and more in off-seasons, which caused certain impacts and losses to the company. To protect its legitimate rights, the company delayed payment of these amounts. Regarding the most concerning issue of holding 1.7 billion yuan in cash while also having large debts, Kedi Dairy replied that as of the reply date, the company's bank deposits and cash on hand totaled over 1.7 billion yuan, and there were no frozen bank accounts or funds actually used by other parties. The company's asset-liability ratio was 47.99%, which was at a reasonable level in the industry. The main reasons for holding large amounts of monetary funds while also having large bank borrowings were: first, the company planned to use its own funds to further expand production capacity, including investing in new projects such as a 400,000-ton dairy product project and Kedi Juer Dairy's 200,000-ton dairy product project, requiring corresponding construction funds; second, due to the tight financing environment, the company needed to secure more loan quotas to avoid financing risks and prevent capital chain breaks. Additionally, on the evening of August 16, due to suspected violations of laws and regulations, the China Securities Regulatory Commission decided to file a case for investigation against Kedi Dairy. On the evening of August 18, after the Henan Securities Regulatory Bureau issued a investigation notice, Kedi Dairy stated that its chairman attached great importance and established a self-inspection and self-correction group led by the chairman, with financial, technical, and production heads as deputy leaders, to actively cooperate with the Henan Securities Regulatory Bureau's investigation team.
The Authenticity of Kedi Dairy's Semi-annual Report Is Hard to Determine Kedi Dairy's semi-annual report was not only questioned by the SME Board Management Department, but also by three independent directors who stated they could not guarantee its authenticity when it was released. On August 30, Kedi Dairy released its 2019 semi-annual report, achieving operating revenue of approximately 635 million yuan, a year-on-year increase of 9.52%; net profit of 79.5543 million yuan, a year-on-year increase of 22.71%. The board resolution announcement released on the same evening as the interim report showed that on August 22, 2019, the company sent notices for the 15th meeting of the Third Board of Directors by fax, email, and personal delivery. The meeting was held on August 29, 2019, by means of communication voting. The meeting was supposed to have eight directors, and all eight attended, chaired by the company's chairman Zhang Qinghai. The proposal on the full text and summary of the 2019 semi-annual report was reviewed and approved, with five votes in favor and three abstentions. Regarding the three abstentions, the company stated in the semi-annual report that Qiu Hongsheng, Wang Liting, and Huang Xinmin, as independent directors, could not guarantee the truthfulness, accuracy, and completeness of the report's content, because they were unable to fully obtain the financial data used to prepare the 2019 semi-annual report. According to investigations, these three independent directors have backgrounds in accounting. Public information shows that Qiu Hongsheng is a certified senior risk manager, senior economist, and CPV. From May 1995 to August 2000, he worked at China Finance Accounting Consulting Company, engaged in corporate restructuring consulting, financial consulting, and asset appraisal, serving as project manager and department general manager. From September 2000 to December 2008, he served as executive director, business director, and deputy general manager of China Financial Consulting Co., Ltd.; from January 2009 to present, he has been executive director and executive general manager of China Financial Consulting Co., Ltd. He currently serves as an independent director of Youyan New Materials Co., Ltd., China Software and Technology Services Co., Ltd., AVIC Heavy Machinery Co., Ltd., and China Electronics Group Holdings Co., Ltd. Wang Liting is a senior accountant, senior auditor, and certified public accountant. She currently serves as secretary-general of the Zhengzhou Institute of Certified Public Accountants, a member of the Zhengzhou Municipal Committee of the Chinese People's Political Consultative Conference, and a member of the Party Committee of the Henan Provincial Certified Public Accountants Industry. She currently serves as an independent director of Xuchang Yuandong Transmission Shaft Co., Ltd. and Zhengzhou Huajing Diamond Co., Ltd. Now, after repaying the first installment of overdue payments on August 16, Kedi Dairy has not yet repaid the second installment, and the third repayment date is approaching. Twenty dairy farmer representatives gathered again at Kedi Dairy's headquarters, demanding that Kedi Dairy fulfill the repayment agreement. It is reported that the local government once came forward to guarantee the repayment agreement. Relevant leaders said they were helping to coordinate, but so far no detailed solution has been provided. A reporter from Dairy Finance contacted people close to Kedi Dairy to obtain more in-depth information, but the other party said the Kedi incident was too sensitive and did not provide further responses. Where will Kedi Dairy go from here? Dairy Finance will continue to follow up on this story. Source: Dairy Finance (ID: ruyecaijing) Tips will be paid 400-2000 yuan if the tip is adopted.