Zoomlion halts trading after fake sales reports

One of China's biggest heavy machinery manufacturers suspended its shares from trading Monday due to media reports that the company's employees inflated sales data.

Zoomlion Heavy Industry Science and Technology Co announced Monday that its shares on the Shenzhen and Hong Kong stock exchanges would be suspended, to resume trading after it posts a filing about the issue.

Liu Xiaoping, head of Zoomlion's brand management department, declined to comment on the matter when contacted by the Global Times Monday.

The Guangzhou-based New Express Daily reported Monday that it had received materials from anonymous whistle-blowers showing that Zoomlion's Central China sales data is suspicious and abnormal.

According to the report, some Zoomlion employees are suspected of making fake sales last year by selling construction machines to fake buyers during the first three quarters and accepting returns of the machines in the last quarter, so as to deliver attractive sales reports for the company's 20th anniversary on September 28.

In the nine months through September 2012, Zoomlion reported net profit growth of 17 percent year-on-year.

In comparison, Zoomlion's rival Sany Heavy Industry Co reported a 59 percent yearly fall in the same period.

For 2012 as a whole, Zoomlion said it saw its profit decline by 9 percent, while Sany's profit was down by 34 percent.

It is not the first time Zoomlion has faced accusations of sales falsification.

Earlier this year, the company, based in Central China's Hunan Province, halted its shares from trading after the Hong Kong newspaper Ming Pao Daily News reported that the company's sales were overstated. Zoomlion later denied allegations of wrongdoing on several occasions.

But investors seemed unconvinced, and Zoomlion shares have slumped continuously this year in both Shenzhen and Hong Kong.

Zhao Chi, executive vice president of the China Machinery Industry Federation, told the Global Times that a professional auditing agency could step in to clear away investor doubts.

"Last year the construction machinery industry was severely impacted by the country's slowing economy and especially the curbs on the real estate sector," Zhao said, noting that heavy machinery makers have seen dropping demand across the country.

According to statistics from construction machinery industry website gcjx123.com, the total output value of the whole industry for 2012 increased by 0.6 percent year-on-year to 602 billion yuan ($98 billion).

Fu Zhiyong, chief advisor of the Beijing Ruicheng Zhisheng Management Consulting Co, told the Global Times in an earlier interview that the demand for heavy machinery is proportional to government investment in fixed assets, which has reported very slow growth in 2012 amid a weak domestic economy.

An industry insider told the Global Times on condition of anonymity that the slowing pace of government investment into infrastructure, combined with the uncertainty of the property market, have led many heavy machinery makers to suffer from the weak market.

During the first quarter this year, Sany's profit declined by 44 percent; XCMG Group, another heavy machinery maker, posted profits down by 39 percent; and Zoomlion's profit plummeted 72 percent.