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http://www.businesstimes.com.sg/sub/companies/story/0,4574,445598,00.html?
Published July 1, 2011
PwC finds shortfall of 1b yuan in balance: Gaoxian
Probe to find out how shortfall has been used
By LYNN KAN
PRICEWATERHOUSECOOPERS (PwC), which was appointed as special auditors to review the state of affairs at China Gaoxian, has found an apparent shortfall of one billion yuan (S$189.8 million) in the group's cash and bank balance as at Dec 31, 2010.
China Gaoxian's FY2010 unaudited financial statements had shown a cash and bank balance of 1.1 billion yuan. But PwC, which is still verifying the group's bank balances, has to-date obtained evidence which suggests that the aggregate cash and bank balance of the group as at Dec 31, 2010, was about 93 million yuan, China Gaoxian said in an update of the review yesterday.
PwC also noted that the group had outstanding bank liabilities of about 285 million yuan as at Dec 31, 2010, compared with the stated 157 million yuan in the unaudited financial statements.
PwC was appointed special auditors in April to review China Gaoxian's financial position for fiscal 2010 and the quarter ended March 31, 2011. Trouble had started in late March last year when its auditors Ernst & Young could not verify the Dec 31, 2010, bank balances of two of China Gaoxian's subsidiaries.
Yesterday's update said that following instructions from independent directors, PwC is now trying to nail down how the shortfall of one billion yuan has been used. PwC will subsequently also assess the full financial impact on the group.
The company dual-listed on the Korea Exchange (KRX) in late January, when it raised 1.13 billion yuan to expand its business and build its 'Huaxiang Project', a plant in Huzhou City, Zhejiang, to produce PET chips and differentiated polyester yarn.
During the course of the special audit, China Gaoxian had told independent directors that it had entered into several contracts with equipment suppliers and contractors in connection with the Huaxiang Project with a total contract value of about 1.2 billion yuan, of which about 391 million yuan was said to have been paid. The group said about 95 million yuan is now due to be paid under the payment schedules.
China Gaoxian's independent directors had instructed the management to suspend payments to these parties. But China Gaoxian said yesterday that 'any delay in making these payments may lead to a delay in the delivery of the equipment and/or the construction of the Huaxiang Project and result in the company defaulting on its contractual obligations'.
China Gaoxian's independent directors intend to appoint independent advisers to advise shareholders about whether the Huaxiang Project is commercially viable and whether China Gaoxian can complete and operate it. Shareholders' ratification will be sought after the special audit is completed and after independent advisers have concluded their findings, said China Gaoxian.
Trading of China Gaoxian's shares and Korean depository receipts remains suspended on the SGX and KRX, respectively, pending the verdict on its financial status.
Published July 1, 2011
PwC finds shortfall of 1b yuan in balance: Gaoxian
Probe to find out how shortfall has been used
By LYNN KAN
PRICEWATERHOUSECOOPERS (PwC), which was appointed as special auditors to review the state of affairs at China Gaoxian, has found an apparent shortfall of one billion yuan (S$189.8 million) in the group's cash and bank balance as at Dec 31, 2010.
China Gaoxian's FY2010 unaudited financial statements had shown a cash and bank balance of 1.1 billion yuan. But PwC, which is still verifying the group's bank balances, has to-date obtained evidence which suggests that the aggregate cash and bank balance of the group as at Dec 31, 2010, was about 93 million yuan, China Gaoxian said in an update of the review yesterday.
PwC also noted that the group had outstanding bank liabilities of about 285 million yuan as at Dec 31, 2010, compared with the stated 157 million yuan in the unaudited financial statements.
PwC was appointed special auditors in April to review China Gaoxian's financial position for fiscal 2010 and the quarter ended March 31, 2011. Trouble had started in late March last year when its auditors Ernst & Young could not verify the Dec 31, 2010, bank balances of two of China Gaoxian's subsidiaries.
Yesterday's update said that following instructions from independent directors, PwC is now trying to nail down how the shortfall of one billion yuan has been used. PwC will subsequently also assess the full financial impact on the group.
The company dual-listed on the Korea Exchange (KRX) in late January, when it raised 1.13 billion yuan to expand its business and build its 'Huaxiang Project', a plant in Huzhou City, Zhejiang, to produce PET chips and differentiated polyester yarn.
During the course of the special audit, China Gaoxian had told independent directors that it had entered into several contracts with equipment suppliers and contractors in connection with the Huaxiang Project with a total contract value of about 1.2 billion yuan, of which about 391 million yuan was said to have been paid. The group said about 95 million yuan is now due to be paid under the payment schedules.
China Gaoxian's independent directors had instructed the management to suspend payments to these parties. But China Gaoxian said yesterday that 'any delay in making these payments may lead to a delay in the delivery of the equipment and/or the construction of the Huaxiang Project and result in the company defaulting on its contractual obligations'.
China Gaoxian's independent directors intend to appoint independent advisers to advise shareholders about whether the Huaxiang Project is commercially viable and whether China Gaoxian can complete and operate it. Shareholders' ratification will be sought after the special audit is completed and after independent advisers have concluded their findings, said China Gaoxian.
Trading of China Gaoxian's shares and Korean depository receipts remains suspended on the SGX and KRX, respectively, pending the verdict on its financial status.
