A deeply indebted, money-losing Chinese manufacturer of laundry detergent can’t seem to find more than $80 million worth of its products, a revelation that tanked its stock on Monday.
It all started when the Guangzhou-based household-goods maker Lonkey Industrial Co. Guangzhou noticed that about 572 million yuan ($83.8 million) of its merchandise was missing from the inventory of two of its storage partners, both of whom have denied ever receiving it, according to a statement filed to the Shenzhen Stock Exchange on Monday.
The news sent Lonkey’s stock down by the 10% daily limit.
Lonkey said its employees had failed to take stock of the goods stored by two logistics companies in East China’s Jiangsu province, and on Sept. 7 began an inquiry into one of them, according to the statement. However, the logistics firm responded that it hadn’t actually signed any contracts with Lonkey, and wasn’t in possession of any of its merchandise.
On Thursday, Lonkey sent a team to negotiate with the two logistics companies, which denied possessing any of its goods, the statement said.
The stock exchange opened an inquiry into Lonkey on Monday, requiring it to answer questions about its contracts and inventory by Oct. 13.
Lonkey has had its share of financial problems. In the first half of this year, its loss widened to 115 million yuan from roughly 18 million yuan in the first quarter, according to the company’s first-half report. As of Monday, it had 395 million yuan in overdue debt.
The company’s accounts receivable, prepayment and inventory value amounted to 6.5 billion yuan, making up three-quarters of the company’s total assets, the report said. In addition, 12 of Lonkey’s bank accounts containing 2.56 million yuan in total have been frozen.
Lonkey’s financial difficulties have garnered the attention of the Guangzhou government. Two state-owned enterprises based in the city own a combined 45% stake of the company. On Thursday, Lonkey disclosed that the local government purchased a parcel of land it owned in the city for 2.2 billion yuan.
Contact reporter Lu Yutong (yutonglu@caixin.com) and editor Michael Bellart (michaelbellart@caixin.com)
