002538, will be suspended next Monday, and will be designated as ST starting March 31!

Guanle Co., Ltd. (rights protection) (002538) announced late on March 27 that the company and relevant parties received a “Preliminary Notice of Administrative Penalties and Market Bans” issued by the Anhui CSRC. It found that the company’s 2021 and 2023 annual reports contained false entries.

Pursuant to relevant regulations, the Shenzhen Stock Exchange will impose other risk warnings on the company’s shares. The company’s stock will be suspended for 1 day starting March 30, and will resume trading on March 31 with other risk warnings imposed. The stock abbreviation will change from “Guanle” to “ST Guanle”; the daily trading price fluctuation limit will be 5%.

At the same time, the Anhui CSRC plans to decide: to impose a RMB 6 million fine on Guanle; to impose RMB 3 million fines on Jin Guoqing, the former chairman, and Jin Zhenghui, the former general manager, respectively, and to take a 5-year ban from the securities market.

Fictitious construction projects and fertilizer purchasing and sales business

Upon investigation, in 2021, Guanle’s wholly owned subsidiary, Guizhou Lufa Industrial Co., Ltd. (hereinafter referred to as “Guizhou Lufa”), and the Kaipeng Branch of Shaanxi Some Jie Construction Group Co., Ltd. prepared fictitious formwork tunnel boring contracts and settlement statements, fabricating formwork tunnel boring business. Guizhou Lufa paid project funds of RMB 34.70 million. In accounting, it was amortized from long-term deferred expenses to operating costs year by year.

Guizhou Lufa entered into construction contracts with three companies, including Zhejiang Some Xiang Construction Group Co., Ltd. (hereinafter referred to as “Zhejiang Some Xiang”), Wenzhou Some Tai Construction Engineering Co., Ltd. (hereinafter referred to as “Wenzhou Some Tai”), and Fujian Some Hui Construction Group Co., Ltd. (hereinafter referred to as “Fujian Some Hui”). These three companies did not provide engineering business services to Guizhou Lufa, constituting fictitious construction project business. Guizhou Lufa paid RMB 31.20 million. In accounting, it included the relevant engineering business of Wenzhou Some Tai and Fujian Some Hui in operating costs in 2021, and amortized the relevant engineering business of Zhejiang Some Xiang from long-term deferred expenses to operating costs year by year.

The above matters caused Guanle to overstate total assets by RMB 45.80 million in 2021 and overstate total profit by RMB 45.80 million. In addition, in the accounting of the above construction business, it was amortized year by year through long-term deferred expenses, which led Guanle to overstate operating costs by RMB 17.35 million in 2023 and understate total profit by RMB 17.35 million.

Guanle carried out fictitious purchases of urea from Anhui Some He Agricultural Inputs Co., Ltd. and Fengyang Some Shun Agricultural Inputs Co., Ltd., which overincreased operating costs by RMB 18.96 million. Guanle’s wholly owned subsidiary, Anhui Some Guanle Eco-Agri Science and Technology Co., Ltd., conducted fictitious sales of organic fertilizer to 17 distributors, including Some Feng Agricultural Inputs Co., Ltd. in Jingdezhen and an operating unit for Some Xin Agricultural Inputs in Xuancheng, among others, overincreasing operating revenue by RMB 9.50 million. The above fictitious urea purchasing and organic fertilizer sales business resulted in Guanle understating total profit by RMB 9.46 million in 2021.

In summary, by carrying out fictitious construction project business, urea purchasing, and organic fertilizer sales business, Guanle overstated or understated total profit, resulting in false entries in its 2021 annual report and 2023 annual report. Among them, in 2021, the overstatement of total profit amounted to RMB 36.35 million, accounting for 6.76% of the total profit disclosed for the period; in 2023, the understatement of total profit amounted to RMB 17.35 million, accounting for 10.35% of the total profit disclosed for the period.

RMB 3 million fine each for the chairman and the general manager; 5-year ban from the market

The Anhui CSRC stated that Jin Guoqing, then the chairman of Guanle, made decisions and organized Guanle to implement the fictitious urea purchasing and organic fertilizer sales business, directly leading to the existence of false entries in Guanle’s 2021 annual report, and was the directly responsible person in charge. Jin Zhenghui, then the general manager of Guanle and the chief commander of Guizhou Lufa, made decisions and organized Guizhou Lufa to carry out fictitious construction project business, directly leading to the existence of false entries in Guanle’s 2021 and 2023 annual reports, and was the directly responsible person in charge.

Based on the facts, nature, circumstances, and the degree of social harm of the illegal acts of the parties involved, the Anhui CSRC plans to decide: to order Guanle to make corrections, issue a warning, and impose a RMB 6 million fine; to issue warnings to Jin Guoqing and Jin Zhenghui and impose RMB 3 million fines on each. Other people have also been subject to measures such as warnings and fines.

The Anhui CSRC also stated that Jin Guoqing, then the chairman of Guanle, made decisions and organized Guanle to implement fictitious urea purchasing and organic fertilizer sales business; Jin Zhenghui, then the general manager of Guanle and the chief commander of Guizhou Lufa, made decisions and organized Guizhou Lufa to carry out fictitious construction project business; the violations are serious. The Anhui CSRC plans to decide: to impose a 5-year ban from the securities market on Jin Guoqing and Jin Zhenghui.

Source: eCompany

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