China Zhongwang

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China Zhongwang Holdings Limited
中国 忠 旺 控股 有限公司
legal form Corporation
founding 1993
Seat Liaoyang , Liaoning, People's Republic of China
management
  • Executive Director and Vice President: Gou Xihui
Branch Aluminum processing , mining
Website China Zhongwang Holdings Limited

China Zhongwang Holdings Limited (Chinese:中国忠旺控股有限公司) is the world's second largest producer and developer of aluminum - extruded products , and the largest in Asia . The focus of the group and its subsidiaries is primarily on the development of lightweight components in transport, machine and plant construction as well as in energy technology. The company's headquarters are in Liaoning Province , People's Republic of China .

Main business areas

China Zhongwang is mainly active in the production of high-precision, large-format and high-quality industrial aluminum extrusion products, which are primarily used in the transport sector ( e.g. for railroad passenger and freight cars , light trains , subways , cars , trucks , ships , aerospace ), be used in mechanical and plant engineering as well as in electrical energy technology . The group has three main synergetic industries, namely aluminum extrusion, deep processing and flat and longitudinal rolling . These company fields work together on the basis of upstream and downstream resource sharing.

History and size of the company

China Zhongwang was founded in 1993 by Liu Zhongtian and owns or operates more than 90 aluminum extrusion production lines, including 21 production lines with extrusion presses of 75MN or heavier. In 2012, China Zhongwang also ordered two ultra-heavy 225MN extrusion presses, one of which will be ready for use during 2017, while the second is currently being installed in an extrusion line (as of August 2016).

In December 2010, the company was awarded State Accredited Enterprise Technology Center, State CNAS Laboratory, Liaoning Engineering and Technology Research Center, and Liaoning Post-Doctoral Research Center by the China National Accreditation Service for Conformity Assessment (CNAS).

In 2011, China Zhongwang expanded into deep processing and has since produced a range of deep processing products such as: B. industrial aluminum pallets, aluminum high-speed train cars for mountainous regions, aluminum chassis for buses , as well as aluminum bodies and parts for passenger cars .

China Zhongwang has also been working on the implementation of a new product range consisting of flat rolled aluminum with high added value since 2011. The industrial production facility for this in Tianjin is currently in the final test phase. Further investments for the second project phase will be completed by 2018. Ultimately, the flat roll project is expected to have an annual production capacity of three million tons, making it the largest aluminum flat roll production facility in the world.

Recent developments

In October 2011, China Zhongwang announced several large transactions related to the development of its synergetic aluminum flat roll business. The company began developing the project as planned and, along with three independent third-party vendors, entered into a total of six equipment purchase agreements to be handled by two wholly-owned subsidiaries . According to the agreements, China Zhongwang will invest around USD 3.8 billion (approx. HKD 29.5 billion), which will flow into the project in four installments between 2011 and 2014. The contract also provides for the purchase of hot and cold forming mills for the production of medium to high-thickness plate and plate products, as well as melting furnaces , casting lines, quenching furnaces and heat treatment furnaces . Among other things, the secondary production of medium to high-thickness plate and plate products as well as aluminum foil rolling mills is to be initiated. The contract is the first phase in the development of the aluminum flat-rolled production base, which will have an estimated annual production capacity of 1.8 million.

In March 2016, China Zhongwang Holdings Limited released the details of a proposed spin-off of its aluminum extrusion business. The company had a purchase agreement with CRED Holding Co. Limited for the acquisition of the entire stake in Liaoning Zhongwang Group Co. Ltd. completed. Under the agreement, Liaoning Zhongwang, a subsidiary of China Zhongwang, will be sold to CRED Holding Co. for RMB 28.2 billion ( USD 4.3 billion). In return, Zhongwang is to receive the majority stake in CRED Holding and be considered for listing on the Shanghai Stock Exchange. Furthermore, Liu Zhongtian resigns as President of China Zhongwang and is replaced by Lu Changqing.

In February 2017, China Zhongwang's plans to build a new aluminum factory in Daqing , Heilongjiang Province sparked mass protests among the population. It was feared that the factory would cause significant pollution in the area, despite Zhongwang's insistence that all government environmental requirements had been met. In response to the protests, Daqing City authorities said they would further review the construction project.

Foundation and management

Liu Zhongtian is the CEO of China Zhongwang Holdings. Before founding China Zhongwang in 1993, Liu Zhongtian worked for Futian Chemical and Liaoning Chengcheng Plastics and served as chairman of a Liaoyang factory. He has been the Executive Director of China Zhongwang Holdings Limited since January 29, 2008 and also became its chairman on August 1 of the same year. In 2002, Liu received a degree in administrative management from Liaoning Radio and TV University in China. Liu's and his family's net worth was estimated at $ 3.2 billion by Forbes in 2016.

On March 22, 2016, Liu Zhongtian resigned as President, but remained in a leading position as CEO of the Group. On the same day, Lu Changqing assumed the post of president.

Surname title
Mr. Liu Zhongtian Founder, chairman, managing director
Mr. Lu Changqing President and Managing Director
Mr. Gou Xihui Vice President and Managing Director
Mr. Chen Yan Board member
Ms. Zhong Hong Board member
Mr. Wong Chun Wa Independent board member
Mr. Wen Xianjun Independent board member
Mr. Shi Ketong Independent board member
Mr. Roy Lo Wa Kei Independent board member
Mr. Kot Man did finance director

Financial results

For the fiscal year ending December 31, 2015 , China Zhongwang achieved sales of around 16.2 billion RMB, which is a slight increase compared to the same period of the previous year of around 16.0 billion RMB. The gross profit was around 5.3 billion RMB, in 2014 it was around 4.5 billion. The share of shareholders in the equity amounts to around 2.8 billion RMB (as of December 31, 2014: around 2.5 billion) and the balance sheet total is around 1.7 billion RMB (approx. 53.8 billion).

In the same financial year, the sales volume of the aluminum extrusion business was around 750,049 tons (December 31, 2014: around 746,534 tons). The revenues of the aluminum extrusion business were RMB 15.4 billion (December 31, 2014: approximately RMB 15.2 billion).

The sales volume in the deep processing division increased by 15.5% from 63,359 tons (2014) to 73,177 tons in 2015. At the same time, annual sales increased by 13.0% from approximately RMB 1.7 billion in 2014 to RMB 2.0 billion.

RESULTS (currently until the end of 2015)

Fiscal Year Ended December 31st (in RMB'000) 2015 2014 2013 2012 2011
sales 16,171,246 15,971,218 14,306,751 13,497,170 10,305,694
Annual surplus of the company owners 2,804,981 2,477,020 2,126,625 1,806,783 1,105,027

ASSETS AND LIABILITIES

As of December 31st (in RMB'000) 2015 2014 2013 2012 2011
Total assets 71,400,726 53,769,415 40,353,143 33,649,698 27,774,599
Total liabilities 45,409,728 29,440,823 20,714,251 16,141,715 12,097,070
Total equity of the company owners 25,990,998 24,328,592 19,638,892 17,507,983 15,677,529

initial public offering

China Zhongwang went public on the Hong Kong Stock Exchange in May 2009 with 1.4 billion shares (25.9% of its share capital) valued at HK $ 7.0 per share (security number: HKEX 01333).

The IPO was the largest of the year, raising $ 1.26 billion in capital for the company. The IPO was carried out by Citic Securities , JP Morgan and UBS .

Activities abroad

China Zhongwang exports its extruded products to over a dozen countries including the United States , Belgium , the Netherlands , Germany , and the United Kingdom . In the first half of 2016, overseas sales accounted for 15.8% of China Zhongwang's total sales. The following table details the sales by customer location:

country Sales (RMB '000) % of total sales
United States 949.112 12.37
Belgium 41.008 0.53
Netherlands 40.889 0.53
Germany 36.252 0.47
United Kingdom 31.156 0.41
Other 112,201 1.46

In 2014 the group founded new subsidiaries in Japan and Germany in order to open up these markets.

In the summer of 2014, American aluminum groups expressed concern about an 850,000-ton extrusion warehouse in San José Iturbide , Mexico , where one of Zhongwang's Aluminicaste aluminum smelting facilities is located. As a result, anti-dumping proceedings were initiated and the imposition of counter-tariffs was examined.

According to anonymous sources, China Zhongwang Holdings Ltd is involved in an illegal practice to evade US trade tariffs called " transshipping ". Accordingly, extrusion products from China are sold to countries such as B. Mexico exported, where they are then melted down again and sold as raw aluminum to the USA. The China Nonferrous Metals Industry Association (CNMIA) vehemently denied these allegations, describing them as "seriously removed from reality."

The import of extrusions from China and the remelting into raw aluminum is neither illegal, nor are there any known instances in which this would have violated a law. Nonetheless, US corporations were concerned that selling the products in the country could cause domestic prices to fall . The value of aluminum stored in San Jose Iturbide was $ 2 billion, according to anonymous sources, which would represent approximately 6% of the world's aluminum stocks. China Zhongwang denied all allegations of wrongdoing, instead reiterating that it has no manufacturing base outside of China and that exports accounted for only 15% of total sales. In addition, such "reverse" manufacturing practices are not commercially viable for any manufacturer, so the allegation only reflects a lack of understanding of the Chinese tax system.

In 2016, the Wall Street Journal and other publications reported that legal and business documents, trade records , and information from face-to-face meetings disproved Zhongwang's account. According to this, hundreds of thousands of tons of aluminum were shipped through a network of companies with close ties to Liu. One of these companies is owned by Mr. Liu's son, while another is owned by a person who describes himself as "the long-term business partner of the Chinese billionaire." Records also show that China Zhongwang sold aluminum extrusions through Chinese trading companies to GT88 Capital, a company in Singapore . GT88 Capital is owned by Po-Chi "Eric" Shen, a friend of Mr. Liu's son who also owns Aluminicaste in Mexico. For the duration of one month in 2013 the ownership was transferred to Liu's son; but he is no longer listed as an owner. According to the WSJ, Aluminicaste uses a variety of trading companies to bring hundreds of thousands of tons of aluminum from China to Mexico, which would then be melted down for shipping to the United States. Allegedly this is done to take advantage of advantages in the North American Free Trade Agreement in order to then evade various trade restrictions in this way. Liu and China Zhongwang deny any involvement with Aluminicaste, while Liu Zhongtian denied knowing Eric Shen well or being financially involved.

In the summer of 2014, Aluminicaste filed for approval for a $ 1.5 billion aluminum manufacturing facility in Barstow, California . However, the town's chief city director, Charles C. Mitchell, announced that the project will probably not go beyond the planning phase due to the high electricity and material costs. Then in March 2016, Mojave Aluminum President Eric Shen officially informed the city that his company would not proceed with building a scaled-down, $ 120 million version of the original project. By June of that year, thousands of tons of aluminum had been relocated from the Aluminicaste plant and sent to Vietnam, the Mexican Economic Secretariat confirmed.

Also in 2016, the US Commerce Department launched an investigation into the dumping and transshipping allegations made by the US Aluminum Extruders Council .

In the same year, Zhongwang USA LLC, a subsidiary of China Zhongwang, confirmed that it had acquired the American aluminum company Aleris Corp for $ 2.3 billion. This is the largest Chinese foreign purchase in the metal sector to date. Commenting on the deal, Liu said, "This acquisition is an international expansion to create a complementary pillar as I strongly believe in the potential and prospects of Aleris and the aluminum industry as a whole." For national security reasons, the agreement could be subject to Investigations will be conducted by the Department of the Treasury's Committee on Foreign Investment in the United States (CFIUS).

Controversy

Securities prospectus

A report published on September 14, 2009 in the Chinese weekly magazine The Economic Observer stated that several customers named in the IPO - contrary to Zhongwang's official account - had not ordered aluminum from the company. However, two days later the magazine apologized and admitted that the report did not reflect the actual circumstances. China Zhongwang emphasized the accuracy of the prospectus and invited management representatives from the four most important customers to a joint press conference "to vouch for their business relationships with Zhongwang as disclosed in the prospectus."

The financial company Cazenove carried out independent checks on some of the clients listed in the prospectus. Lingyun Industrial Corp. , a supplier to the automotive industry , confirmed that although the company had bought aluminum extrusions from Zhongwang, the purchase volume had been on the low side. In order to regain the meanwhile lost trust of investors and to restore its reputation , China Zhongwang hired the auditing firm Ernst & Young to conduct an independent review of the sales transactions with Zhongwang's ten main customers from January 1, 2008 to June 30, 2009. In January 2010, China Zhongwang announced that Ernst & Young had found "no material deficits" in the prospectus. On January 21, the company felt tempted to elaborate on the previous statement, which further put investors off. Ernst & Young did not comment on this. Since going public, the group's value has fallen by almost 50%.

Anonymous report

In 2015, Dupré Analytics, a company specializing in short sales , accused China Zhongwang of artificially inflating its sales by distributing exports through subsidiaries. According to the report, the Liu family had diverted funds from Zhongwang since 2011 and said the company had raised HK $ 36.5 billion to purchase its own products through third-party companies owned by Liu. This drove the sales figures up. Dupré estimated that up to 62.5% of Zhongwang's sales since 2011 have been fraudulently generated.

Dupré Analytics also assumed that companies associated with Zhongwang had shipped more than a million tons of semi-finished products to Mexico. Further reports speculated that these products were exported to Vietnam in order to be resold from there to the American market. The report caused Zhongwang Holdings to suspend sales of its shares in Hong Kong on July 31. Zhongwang denied any wrongdoing: "The allegations against the company in this report are completely baseless and not based on facts."

Investigation by the US Commerce Department

In March 2016, the US Department of Commerce launched an investigation into a petition from the US Aluminum Extruders Council to determine whether China Zhongwang's export of certain 5050 extrusions circumvented US anti-dumping duties . A preliminary finding in early November 2016 suggested that all 5,050 extrusions imported from China had in fact evaded US anti-dumping duties. In a public statement, China Zhongwang said it respects the U.S. Department of Commerce's preliminary determination and is always striving to comply with American trade laws.

The company is accused of hiding the Chinese origins of allegedly nearly 1 million tons of aluminum by exporting semi-finished products to Mexico before they were remelted for sale in the U.S. market. While the company publicly denied any wrongdoing, stating that it had no manufacturing facility outside of China, the China Non-ferrous Metals Industry Association also questioned the validity of the allegations.

The investigation is also investigating whether a New Jersey company named Aluminum Shapes LLC , Zhongwang, helped break US trade restrictions. Aluminum Shapes denies any association with China Zhongwang, the US Aluminum Extruders Council insists that the aluminum pallets stored at the facility were made in China and were imported to circumvent anti-dumping duties. According to a former manager at Aluminum Shapes, thousands of tons of aluminum pallets were delivered to China's Zhongwang packaging in 2013. The former manager also stated that Aluminum Shapes was responsible for remelting the pallets and making new aluminum products from them. Aluminum Shapes also denies these allegations. Liu said that he was not trying to send aluminum to the US and that he had no business interest in aluminum shapes.

Individual evidence

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