Without prior review and authorization, Hengli Hydraulics (601100.SH), known as "Hydraulics No.
1," managed 500 million yuan of idle raised funds in cash until four months later when it urgently announced and patched up the "loophole."
On September 21, Hengli Hydraulics issued an announcement to ratify the use of some idle raised funds for cash management.
The announcement showed that on April 26 of this year, Hengli Hydraulics used 500 million yuan of idle raised funds to purchase structured deposits, and redeemed them to the raised funds special account on May 17.
The reporter noticed that in the "Special Report on the Placement and Use of Raised Funds for the Semi-annual Period of 2024" (hereinafter referred to as "Special Report") disclosed by Hengli Hydraulics on August 26 this year, it still emphasized: "During the reporting period, the company did not engage in cash management or invest in related products with idle raised funds."
"The listed company's choice to purchase structured deposits essentially demonstrates a responsible attitude towards the safety of raised funds.
Hengli Hydraulics also made up for the procedures afterwards, as much as possible to reduce the impact of the incident."
Chen Tiejiao, a lawyer from Shanghai Guangming Law Firm, analyzed to the reporter that the incident still reflects the existence of deficiencies in financial management of listed companies.
"The principal and income of the matured products have been redeemed to the raised funds special account, so it has not had an adverse effect on the company's raised funds investment plan, nor has it changed the use of raised funds or harmed the overall interests of the company and shareholders, and will not affect the normal development of the company's main business."
Hengli Hydraulics stated.
There may be a problem with financial management deficiencies.
Public information shows that in September 2021, Hengli Hydraulics disclosed a non-public issuance plan, planning to raise funds of no more than 5 billion yuan through a private placement.
After deducting the issuance expenses, the net amount of the raised funds will be used to invest in Hengli Mexico Project, Linear Actuator Project, and Hengli International R&D Center Project, etc.
In December 2022, Hengli Hydraulics issued the "Report on the Issuance of Non-public Issuance of A Shares" stating that the company has completed the private placement fundraising plan.
It is understood that the price of Hengli Hydraulics' non-public issuance of A shares this time is 56.40 yuan/share, with an issuance of about 35.461 million shares, and the total amount of raised funds is about 2 billion yuan.
However, just over a year later, Hengli Hydraulics had the situation of using some idle raised funds for cash management without review and authorization.
On September 21, Hengli Hydraulics stated that after the company's self-inspection, it was found that due to the relevant business operators' cognitive bias towards bank products, they mistakenly understood structured deposit products as general deposits.
The relevant operators bought according to the company's internal financial and approval procedures for purchasing general deposits, resulting in the situation of using idle raised funds for cash management.
The sponsoring institution also believes that Hengli Hydraulics has the situation of using some idle raised funds for cash management without review and authorization.
"The company held the eleventh meeting of the fifth board of directors, the tenth meeting of the fifth supervisory board, and the third special meeting of the independent directors of the fifth board of directors on September 20, 2024, to ratify the above situation of using some idle raised funds for cash management without review and authorization."
Hengli Hydraulics stated that the company has conducted a detailed sorting and investigation of the above specific situation, seriously analyzed the existing problems, and promptly notified and conveyed to the company's directors, supervisors, and relevant department personnel, and organized relevant departments to conduct special training on the relevant laws and regulations of raised funds cash management, to correct their understanding and cognitive bias problems, and ensure that similar matters will not happen in the future.
The reporter noticed that in the "Special Report" disclosed to the outside world on August 26 this year, Hengli Hydraulics stated that the balance of the raised funds special account was a total of 688 million yuan as of June 30, 2024.
"During the reporting period, there was no cash management or investment in related products with idle raised funds."
"According to Articles 13 and 14 of the 'Administrative Measures for Listed Companies' Raised Funds,' temporarily idle raised funds can be managed in cash.
This item clearly stipulates that the investment targets must meet the requirements of safety and liquidity, and at the same time, they must be reviewed and approved by the listed company's board of directors, with the consent of independent directors, supervisors, and sponsoring institutions, and must be disclosed in an announcement within two trading days."
Chen Tiejiao analyzed to the reporter.
Chen Tiejiao further stated: "As a company listed on the main board of the Shanghai Stock Exchange, Hengli Hydraulics should consciously maintain the safety of listed companies' raised funds and should not participate in, assist, or connive at listed companies to change the use of raised funds arbitrarily or in disguise."
In Chen Tiejiao's view, the above incident reflects that Hengli Hydraulics may have deficiencies in financial management, and the relevant financial personnel lack understanding of financial products, which may lead to other management errors in subsequent capital operations.
"After four months, Hengli Hydraulics found the problem through self-inspection and supplemented the disclosure of relevant information, which is necessary in the procedure.
Although this incident did not cause a substantial impact on the safety of raised funds, it is still worth the public's attention."
The construction progress of the Mexican factory is not as expected.
As "Hydraulics No.
1," Hengli Hydraulics' performance is also highly watched by the outside world.
It is understood that Hengli Hydraulics' headquarters is located in Changzhou City, Jiangsu Province.
After more than 30 years of development, it has developed from the manufacturing of hydraulic cylinders to a large-scale comprehensive enterprise integrating hydraulic components, precision castings, hydraulic systems, and other industries.
Downstream customers include Caterpillar, Japan Kobe Steel, Hitachi Construction Machinery, Kubota Construction Machinery, Sany Group, XCMG, LiuGong, and other Fortune 500 and globally renowned host customers.
Wind data shows that from 2021 to 2023, Hengli Hydraulics achieved revenues of 9.309 billion yuan, 8.197 billion yuan, and 8.985 billion yuan, respectively, with net profits attributable to the parent company of 2.694 billion yuan, 2.343 billion yuan, and 2.499 billion yuan, respectively, and the performance has obvious fluctuations.
In the first half of this year, Hengli Hydraulics' operating income was 4.833 billion yuan, a year-on-year increase of 8.56%; net profit attributable to the parent company was 1.288 billion yuan, a year-on-year increase of 0.71%.
However, Hengli Hydraulics' net profit after deducting non-recurring gains and losses was 1.24 billion yuan, a year-on-year decrease of 0.23%.
The reporter noticed that against the background of the construction machinery market still at the bottoming stage, Hengli Hydraulics is continuing to develop overseas markets.
In 2023, Hengli Hydraulics' overseas revenue reached 1.927 billion yuan, a year-on-year increase of 9.95%, accounting for 21.45% of the total revenue.
"While stabilizing the domestic market, the company actively develops overseas markets and continues to promote overseas capacity layout.
During the reporting period, the company's overseas revenue achieved a year-on-year increase of 15.29%.
The construction of the Mexican factory has entered the final stage, laying a solid foundation for further development of the American market."
Hengli Hydraulics stated in the 2024 semi-annual report.
However, developing overseas markets is not smooth sailing.
On August 8 this year, Hengli Hydraulics issued an announcement stating that around 15:30 on August 5, 2024, local time in Mexico, a partial fire accident occurred in the construction of the factory of the wholly-owned subsidiary HENGLI DE MEXICO, S.A. DE C.V. (hereinafter referred to as "Hengli Mexico Project").
Currently, the factory is still under construction and has not been completed and handed over.
"After the accident, the company immediately activated the emergency plan, quickly took measures to evacuate personnel, and fully cooperated with the local fire department to carry out on-site fire extinguishing and rescue work.
With the joint efforts of the local fire department and the company, the relevant fire was controlled and finally extinguished in time.
Preliminary investigation shows that the fire accident was caused by the improper operation of the construction party, and the specific reasons are to be further investigated."
Hengli Hydraulics stated.
In fact, the promotion process of the Hengli Mexico Project, one of the investment projects, is also not smooth.
In the 2022 annual report, Hengli Hydraulics described the progress of the project as: "The factory is expected to be put into use in May 2023, and to start production in the fourth quarter of 2023."
In the 2024 semi-annual report, Hengli Hydraulics still stated: "The construction of the Mexican factory has entered the final stage."
"In recent years, the company has accelerated the implementation of the internationalization strategy, and increased the development and investment in overseas markets such as Europe, North America, and Southeast Asia.
However, due to the influence of many factors such as politics, culture, technology, brand, and human resources in international business, the company's overseas business and overseas investment still have a certain degree of uncertainty and risk."
Hengli Hydraulics stated.
Regarding the reasons for using some idle raised funds for cash management without the review and authorization of the board of directors, and the delay in the production of the Mexican factory, the reporter called the Hengli Hydraulics securities department several times but failed to connect.
Later, the reporter sent an interview outline to the email disclosed in the 2024 semi-annual report of Hengli Hydraulics and contacted the relevant staff of the general office of Hengli Hydraulics, but did not receive further reply by the time of press release.
