Asian Citrus Holdings has announced that it will no longer purchase fertilisers from Chaoda Modern Agriculture in what looks like a move to sever ties with the scandal-plagued horticultural company.
In a company statement, China’s largest orange plantation owner said it would not renew a fertiliser contract with Chaoda’s subsidiary, Fujian Chaoda Group, once it expires on 30 June 2012. By that stage, the value of fertilisers purchased under the agreement, which was struck in November 2009, are expected to have exceeded Yn90m (US$14m).
The announcement on Monday (10 October) helped to revive shares in Asian Citrus Holdings, which have been hit recently by the company’s links with Chaoda Modern, whose chairman is under scrutiny for alleged insider trading.
Chaoda Modern, a China-based vegetable supplier, owns 13.4 per cent of Asian Citrus and it has a non-executive director, Ip Chi Ming, on its executive board.
The Hong Kong Stock Exchange last month suspended Chaoda Modern’s stock amid an investigation into insider dealing by chairman Kwok Ho and chief financial officer Andy Chain. Mr Kwok also owns 95 per cent of Fujian Chaoda.
Chaoda Modern was accused in May by Next Magazine, a Chinese language magazine based in Hong Kong, of overstating its farmland holdings, but Chaoda denied the report and said it would sue the publication.
In late September, the Hong Kong government confirmed news of market misconduct proceedings against Chaoda Modern Agriculture. Although the charges against Chaoda Modern weren’t specified, the tribunal handles civil cases on matters such as insider trading, false trading, price rigging and stock-market manipulation against companies and directors regulated under Hong Kong securities laws.
Asian Citrus Holdings’ share price slumped to a two-year low of 24.08p in London on 30 September, marking a 70 per cent decline in the year to date.
By the end of Monday (10 October) trading following the Asian Citrus announcement that it was to stop buying fertilisers from Fujian Chaoda, its share price was back up at 41.12p, representing a rebound of more than 70 per cent this month alone.
Seymour Pierce analyst Sue Munden told agrimoney.com the move by Asian Citrus was likely to have been welcomed by investors, assuring shareholders of the company’s 'robust corporate governance'.
Chaoda Modern Agriculture grows 150 different crops on 31 production bases across 13 Chinese provinces, according to its website. The company employs 23,000 people and owns over 44,282ha of farmland.
Chaoda Modern is one of a series of Chinese groups to be targeted by fraud allegations of late, other notable examples being China Forestry, a Chinese forestry company listed in Hong Kong and its rival Sino Forest Corporation, which is listed in Toronto.
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