West China Cement denies fraud claim
Shares in mainland cement maker West China Cement were suspended from trading at the company's request yesterday, following the release of an analyst's report alleging the company was guilty of "blatant fraud".
The request followed the overnight release of a report by US firm Glaucus Research Group that investigates Chinese listed companies, accusing West China Cement of "fabricating" its financial statements. "We believe that West China Cement is a blatant fraud. We believe West China Cement's margins are fabricated," the report stated.
The report alleged documents by China's State Administration for Industry and Commerce indicated that the profit margin of one of West China Cement's plants was far below the margin stated by the company. A cement price war in Shaanxi province last year "exposes the absurdity of West China Cement's margins," the report stated.
In a statement to the Hong Kong stock market, West China Cement requested the suspension "pending the release of a clarification announcement by the company which is price-sensitive in nature". It further said the report was groundless and was based on inaccurate data. "The report adopted a very general approach to its analysis of the group's bank balance and this is clearly misleading," the company said.
Italian cement maker Italcementi agreed in May to acquire a 6.25 percent stake in West China Cement as the group moved to strengthen its position in the world's largest building materials market.