Huiyuan, still suspended from trading, released unaudited annual data showing a 10.35-fold year-on-year increase in net profit for 2017. However, thousands of employees at its subsidiaries have not yet received their February wages.

It's All About Money

China Huiyuan Juice Group Co., Ltd. (hereinafter referred to as "Huiyuan") appears somewhat "contradictory" at the moment.

On one hand, at the time when the annual report should have been disclosed, Huiyuan first suspended trading irregularly, then released its unaudited 2017 financial data on the 19th. On the other hand, the data shows that in 2017, despite revenue not exceeding 2016's level, net profit "increased by 10.35 times year-on-year."

The announcement shows that Huiyuan achieved revenue of 5.382 billion yuan in 2017, with net profit of 135 million yuan. In 2016, its revenue was 5.74 billion yuan, and net profit was over 11.9 million yuan.

More interestingly, despite the significant increase in net profit, employees at Huiyuan's sales offices (institutions established in multiple regions across the country to better achieve sales) have not yet received their February wages.

"Since working at Huiyuan, this is the first time wages have been paid late," an employee at a sales office told New Financial Observation on April 11, adding that the delay has been ongoing since the end of last year.

On the 20th, this situation did not improve even after Huiyuan announced the surge in net profit. According to the employee, as many as several thousand people have not received their February wages.

"It's somewhat puzzling whether Huiyuan is short of money or not short of money," a senior food industry practitioner told New Financial Observation.

Earlier, at the beginning of April when the annual report should have been disclosed, Huiyuan was suspended from trading on the Hong Kong Main Board, mainly due to money—earlier, Huiyuan was exposed for lending 4.275 billion yuan in short-term loans to Beijing Huiyuan Beverage, a subsidiary of the Huiyuan Group, without board approval, agreement, or disclosure. This violated Hong Kong listing rules regarding connected transaction reporting, shareholder approval, and disclosure.

In fact, for the general public, the more concerning issue is that Huiyuan's total revenue last year was 5.741 billion yuan, so where did the 4.275 billion yuan lent out come from?

In response, Huiyuan officially told New Financial Observation that the idle funds lent out mainly came from its own operating funds and RMB loans, and that both the loans and interest have been fully recovered.

In its official view, Huiyuan Group has a large amount of cash deposits in its domestic RMB bank accounts but no suitable investment opportunities. On the other hand, the group needs to continue repaying bank loans and bond interest, with high capital costs. Under these circumstances, the company believed that lending idle funds to non-listed related parties would effectively help Huiyuan Juice utilize additional funds to generate interest income and offset capital costs, hence the decision to lend.

Whether it's the large-scale lending or the surge in net profit, it all suggests that Huiyuan is not short of money. However, a Huiyuan that is not short of money has not only failed to pay its employees' wages on time but also has some factories in a state of "semi-production halt."

The so-called "semi-production halt" means "produce when there's money, wait when there's none." The aforementioned employee said that the information he received at the sales office was that "many factories have no money to produce, no money to pay suppliers, so there are constant supply shortages. Among the suppliers are those providing packaging and raw materials."

Is Management to Blame?

However, the more interesting part is that the aforementioned employees are also required to "operate" loan platforms.

"They asked us to 'handle' Daokou Loan and Huida Loan, requiring director-level employees to borrow 200,000 yuan each," the employee said.

He intercepted a notice from "above" showing: "Everyone, the 'Huida Loan' we promoted at the end of 2017 has now had its backend system maintained. Please follow the instructions and operate again. Please assist in promoting it, General Manager So-and-So."

Also issued were PDF files on how to operate Daokou Loan and Huida Loan. What is intriguing is that employees are responsible for borrowing money, while the "company" is responsible for repaying it. They have no right to inquire about the purpose of the borrowed funds.

"Who knows? They said it's about registering for loans and later matters, not our concern," the aforementioned employee said.

It is worth noting that many employees working at Huiyuan's sales offices, like the former employee, were "assigned" to Wanmeng Huida (Tianjin Wanmeng Huida Industrial Co., Ltd., hereinafter referred to as Wanmeng Huida) last year. "This company actually manages the specific operations of Huiyuan's sales offices across the country. However, besides selling Huiyuan's products, we also sell products from other companies," the aforementioned employee said.

Huiyuan officially explained the "existence" of Wanmeng Huida as follows: "Wanmeng Huida is a brand under Huiyuan. This platform integrates resources from the Huiyuan Group, Zhenghe Island Entrepreneurs Association, Shiyouhui, and other business alliances. It is a new commercial trading platform and business consortium that combines a ten-thousand-enterprise alliance, reaching hundreds of millions of users, eliminating intermediate links, and combining factories with business districts. Tianjin Wanmeng Huida is Wanmeng Huida's branch in Tianjin, responsible for related business in the Tianjin business district."

In reality, "employees from the Shandong sales office and other regional sales offices also belong to Wanmeng Huida..." the aforementioned employee said.

In his understanding, Huiyuan has reached a point where it needs to "borrow money to pay wages." "Perhaps once enough money is borrowed, wages will be paid. Although employees have complaints, if they don't resign, they can only do what they're told."

While recounting his confusion to New Financial Observation, the employee repeatedly used the phrase "who knows." This employee, who has worked at Huiyuan for over ten years, finds it increasingly difficult to understand Huiyuan.

Occasionally, he would retort: "I can't figure it out; can you?"

It's not an isolated case. In the eyes of a former Huiyuan employee, Huiyuan "killed itself." In his view, as a family business, Huiyuan's management lacks continuity. "Any decision needs time to prove itself, but before the proof process is complete, Huiyuan is already eager to make changes."

Regarding the "semi-production halt" status of some factories, delayed wage payments, and employees needing to "borrow money," as of press time, Huiyuan officials were still "looking into" the matter and had not provided a response. However, in their response, they emphasized that Huiyuan is currently operating normally, developing well, and has sufficient capital chain and cash flow.

The aforementioned announcement shows that Huiyuan's financing income reached 130 million yuan in 2017, which makes one wonder: is this juice company planning to switch to finance?

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