On February 11, Jinzi Ham Co.Ltd(002515) (002515, SZ), replying to the inquiry of Shenzhen Stock Exchange on commodity futures hedging business, said that the company believed that the internal control system and risk management measures of the business were perfect, but there were some deficiencies and defects in the provisions and implementation of the internal control system, including the mismatch between cash and futures, the need to strengthen internal control supervision, the wrong accounting treatment The letter didn’t wait in time.
Previously, Jinzi Ham Co.Ltd(002515) disclosed that a futures trader of the company closed the contract without authorization, resulting in a total loss of 55.1053 million yuan in the company’s account. Subsequently, the trader “paid” 55.1053 million yuan according to the company’s regulations. For a time, the trader was called “local tyrant trader” by netizens.
On February 11, Jinzi Ham Co.Ltd(002515) said that the futures trader had been persuaded to withdraw. With regard to the source of the 55 million yuan fund, Shi xiongbiao, the shareholder of the company and the trader’s father-in-law, paid off most of the compensation, including the 47 million yuan loan from Shi Yanjun, President and Wang Qihui, vice president of the company.
Futures and spot mismatch
For this event, Jinzi Ham Co.Ltd(002515) said that due to the lack of deep understanding of the trading variety and its risk exposure, it simply selected the company’s pig procurement link to carry out hedging business, and habitually guided the hedging business in the way of spot thinking. Therefore, under the unilateral decline of pig spot and Futures in 2021, The failure to achieve the expected goal of hedging has brought profound lessons to the company.
In the selection of futures varieties, the company carries out the hedging business of pig futures, mainly buying lh2203 and lh2111 contracts. From the hedging transactions in 2021 disclosed by Jinzi Ham Co.Ltd(002515) , the company’s position in the position under construction was 16300 tons (1017 hands) as of August 31, 2021, which was lower than 2 / 3 of the company’s purchase volume in 2020 and the planned purchase volume in 2021.
However, as the spot price of live pigs continued to decline in 2021, the development of the company’s brand meat business did not meet expectations, so it did not fully match the actual purchase quantity of the company in the spot market in 2021.
After verification, the annual audit accountant of Tianjian certified public accountants believes that although the compensation paid by futures traders has been received in time according to the relevant assessment measures, which has avoided the actual losses of the company, there are still some internal control defects, such as failing to make timely adjustment according to the market conditions when building positions in the futures market, It leads to deviation from the actual operating demand of the company in a certain period of time.
In addition, the company also has the situation that the accounting treatment of important matters of futures hedging business is wrong or not timely and not disclosed in time.
Jinzi Ham Co.Ltd(002515) made the following explanation for the delay of xinphi: “the main reason is that there is a deviation in the understanding of the accounting standards related to hedging. The received compensation is mistakenly regarded as the principal of futures hedging, which is included in the principal of recovered Futures Guarantee, and there is no account treatment for investment loss and compensation income.”
Based on this, the Securities Department of the company believes that this event has no actual impact on the company’s operation, has no significant impact on the company’s profits, and does not need to perform the obligation of information disclosure, so it has not made information disclosure. Now, the company has realized that its understanding of the accounting standards and information disclosure of financial derivatives transactions for the first time is not perfect, and will effectively strengthen the training and professional ability training of staff.
President and vice president “help” to compensate the loss
Recalling the event, Jinzi Ham Co.Ltd(002515) mentioned that last September, the pig futures index continued to decline unilaterally from 16075 points. On September 16, 2021, the pig futures index quickly fell from 14172 points to 13798 points. The company’s futures traders were under great pressure and worried about the risk of forced closing of the company’s position contracts.
In the morning of that day, the futures trader sold a total of 902 pig contracts without asking for instructions from any member of the futures decision-making group, and tried to rebuild the position at a lower price, resulting in an actual investment loss of about 44.22 million yuan on that day. Finally, the total loss of the company’s account was 55.1053 million yuan. Until September 27, the futures trader reported the relevant situation to the company and promised to bear all the losses according to the relevant assessment methods.
Since the implementation of position closing operation in September 2021, the company terminated the trading of commodity futures hedging business. In November, Jinzi Ham Co.Ltd(002515) dissuaded the futures trader and investigated the corresponding responsibilities of the main members of the futures decision-making and working group.
In this regard, the annual audit accountant believes that the company’s daily supervision and control of futures traders needs to be strengthened, and the operation authority of futures traders needs to be further controlled and refined. At the same time, the supervision and inspection of futures accounts should be strengthened, and the futures accounts should be reconciled and inspected regularly to find abnormal and illegal transactions in time.
What the market was more concerned about before was that according to the company’s reply, the futures traders compensated all the money in place within three days, which was really surprising.
As for the specific source of funds for the compensation, Wang Qihui, vice president of the company, told the daily economic news that it was raised by the family. On February 12, the company responded that the funds came from the self owned and self raised funds of the trader and his father-in-law Shi xiongbiao. It is worth mentioning that Shi xiongbiao is a natural person shareholder holding 3.45% of the shares of the company, and Shi Yanjun, Shi xiongbiao’s younger brother, is the president, former chairman and former actual controller of the company.
On September 29, 2021, Shi xiongbiao borrowed 41.05 million yuan and 5.95 million yuan from his friend Wang Qihui and brother Shi Yanjun respectively. After that, Shi xiongbiao repaid most of Wang Qihui’s arrears through the transfer of shares of other companies he held. As of February 11, 2022, 6.9278 million yuan had not been repaid; At the same time, according to Shi Yanjun’s entrustment, he paid 5.7 million yuan for the maintenance of his nephew and returned the difference. As of February 11, 2022, Shi xiongbiao’s occupation of Shi Yanjun’s funds had been eliminated.
In response to the inquiry about the nature of the compensation transaction, Jinzi Ham Co.Ltd(002515) responded that Shi xiongbiao used his own and self raised funds to help his son-in-law pay the compensation based on his father-in-law rather than his shareholder’s identity. This transaction did not constitute an equity transaction. Therefore, the company included the compensation in non operating income and did not use the compensation to adjust profits.
