July 20, 2011

Zhongpin hits back at "incorrect" report from China Economic Review

Zhongpin Inc., a China-based pork processor, claimed a report from the China Economic Review alleging it overstated information including the number of hogs processed had "numerous" errors.

The Review said on its website this week that its own research indicated that Zhongpin overstated figures such as hogs purchased from farms in China's Henan province and its number of retail stores. Zhongpin shares fell 8.9% in Nasdaq Stock Market trading on Tuesday (Jul 19) after dropping 8.8% on July 18.

"That report, from the China Economic Review, has numerous incorrect facts, incorrect assumptions, sometimes limited sampling and is generally based on relatively superficial understanding of the business and the industry," Warren Wang, chief financial officer of the Henan-based company, said on a conference call with analysts yesterday. "The report is full of speculation and has no foundation in fact."

Zhongpin is among Chinese companies listed abroad that have faced questions about their credibility in recent months. Short sellers said companies including Sino-Forest Corp. and Longtop Financial Technologies Ltd. were exaggerating operations.

Zhongpin bought more than 30,000 hogs from Chuying farm in 2010, not 10,000 as the Review reported, Sterling Song, the company's investor relations manager, said on the conference call. The hog processing estimates in the report were wrong; Zhongpin bought and slaughtered about 4.8 million hogs in 2010, he said. Zhongpin has 1,270 retail stores in China, Song said.

Executive Vice President Baoke Ben said the company stands by the information and numbers in its US Securities and Exchange Commission (SEC) filings, and investors are welcome to come visit Zhongpin's operations in China.

The company said an internal check revealed the report's author had not spoken to any senior managers. The China Economic Review said it holds no short or long position on Zhongpin, and will review possible errors the company highlighted, Wang said.

Zhongpin's shares have fallen 54% this year.