On February 7, the first day of the year of the tiger, Nanjing Red Sun Co.Ltd(000525) (000525, SZ; yesterday’s closing price was 7.51 yuan) received a letter of concern from the Shenzhen Stock Exchange, asking it to explain that in 2021, the company plans to withdraw about 1.9 billion yuan of bad debt reserves for relevant receivables occupied by the funds of controlling shareholders and their related parties, and about 1.4 billion yuan of estimated liabilities for related guarantees and litigation.
It is reported that Nanjing Red Sun Co.Ltd(000525) on January 28, the company released the performance forecast for 2021, saying that the company is expected to achieve an operating revenue of 4.5 billion yuan to 4.7 billion yuan in 2021, and the expected loss of net profit attributable to the parent company is 3.4 billion yuan to 3.7 billion yuan. The main reason for the large loss of performance is that the company plans to withdraw a large amount of credit impairment loss.
need to explain the dispute of advertising contract
According to the announcement on the proposed provision for impairment of assets issued on January 28, Nanjing Red Sun Co.Ltd(000525) said that after a comprehensive inventory and asset impairment test of the company and its subsidiaries within the scope of consolidation, the company plans to withdraw a total of about 3.33 billion yuan for impairment of various assets.
Among them, Nanjing Red Sun Co.Ltd(000525) controlling shareholder Nanjing First Pesticide Group Co., Ltd. (hereinafter referred to as Nanyi agricultural group) and shareholder Red Sun Group Co., Ltd. (hereinafter referred to as Red Sun Group) still occupy non operating funds of the company as of December 31, 2021. At present, Nanyi agricultural group has entered the reorganization procedure. The company made prudent judgment according to the solvency of Nanyi agricultural group and red sun group, and accrued credit impairment loss of about 1.9 billion yuan.
In June 2021, the court ruled to accept the reorganization application of Nanyi agricultural group. As of January 5, 2022, the balance of non operating funds occupied by Nanyi agricultural group and its related party red sun group was 2.952 billion yuan.
In this regard, the Shenzhen stock exchange requires Nanjing Red Sun Co.Ltd(000525) to explain the adequacy of the company’s provision for relevant bad debts in combination with the above-mentioned settlement of fund occupation, the declaration of the company’s creditor’s rights and the possible repayment ratio.
As of December 31, 2021, Nanyi agricultural group and red sun group had guarantees. It is disclosed that as of June 30, 2021, Nanjing Red Sun Co.Ltd(000525) of the external guarantee balance, the guarantee balance to the controlling shareholder Nanyi agricultural group and its related party red sun group was 1.452 billion yuan and 552 million yuan respectively.
In this regard, the Shenzhen stock exchange requires that Nanjing Red Sun Co.Ltd(000525) in combination with the solvency of Nanyi agricultural group and red sun group, self check and explain whether the company has been transferred by the bank again due to undertaking the guarantee liability, and the adequacy of the company’s provision of estimated liabilities for the above guarantee.
Meanwhile, during the reporting period, Nanjing Red Sun Co.Ltd(000525) was sued by CNR Jinxin (Beijing) culture media Co., Ltd. due to advertising contract disputes. Based on the principle of prudence, the company plans to withdraw about 1.4 billion yuan of credit impairment loss for the related guarantee and pending litigation.
In this regard, Shenzhen stock exchange requires Nanjing Red Sun Co.Ltd(000525) to explain the specific circumstances of the advertising contract dispute, including but not limited to litigation matters, relevant amount, early information disclosure, etc., and to explain the adequacy of the provision of relevant estimated liabilities of the company.
the company’s ability to continue as a going concern
The attention letter also focuses on other problems in Nanjing Red Sun Co.Ltd(000525) .
In 2018, Nanjing Red Sun Co.Ltd(000525) acquired 100% equity of Chongqing Zhongbang Technology Co., Ltd. (hereinafter referred to as Chongqing Zhongbang) held by Jiangsu red sun Pharmaceutical Group Co., Ltd. (hereinafter referred to as “red sun Pharmaceutical Group”), a related party of Nanyi agricultural group, in cash. In 2019, Chongqing Zhongbang failed to fulfill its performance commitment. In June 2020, both parties made performance commitment adjustment. Chongqing Zhongbang performance commitment period was adjusted to 2018, 2019, 2020 and 2021, and the total audited after tax net profit of each year was no less than 369 million yuan. Nanyi agricultural group promised to bear the full performance guarantee responsibility for the commitment made by red sun Pharmaceutical Group.
Shenzhen stock exchange requires Nanjing Red Sun Co.Ltd(000525) to check and explain the achievement of the above performance commitments and relevant accounting treatment.
In addition, as of September 30, 2021, the book balance of Nanjing Red Sun Co.Ltd(000525) goodwill was 613 million yuan, including 198 million yuan of goodwill formed by the acquisition of Nanjing Red Sun biochemistry Co., Ltd. (hereinafter referred to as Nanjing biochemical). The net profits of Nanjing biochemical in 2019, 2020 and the first half of 2021 were – 132 million yuan, – 35 million yuan and 05 million yuan respectively. As of June 30, 2021, The company has not made provision for impairment.
Shenzhen stock exchange requires Nanjing Red Sun Co.Ltd(000525) to check whether there are signs of impairment of the above goodwill and the adequacy of the provision for impairment.
The daily economic news reporter noted that in the performance forecast of 2021, Nanjing Red Sun Co.Ltd(000525) said that since the company’s main products gradually “increased in volume and price” from the third quarter of 2021, the operating revenue increased by 11.88% ~ 16.86% year-on-year, and the net profit after deducting non recurring profits and losses increased by 13.56% ~ 28.6% year-on-year.
However, the attention letter shows that the net profit after deducting non recurring profits and losses from Nanjing Red Sun Co.Ltd(000525) 2019 to 2020 is negative for two consecutive years. The performance forecast shows that the net profit of the company after deducting non recurring profits and losses in 2021 is still negative.
In this regard, the Shenzhen stock exchange requires Nanjing Red Sun Co.Ltd(000525) to explain whether there is significant uncertainty in the company’s sustainable operation ability in combination with the composition of its main business, the current production and operation status and the expected loss in the current period.
