Performance forecast "changes face", Rongsheng Petro Chemical receives warning letter, last year net profit dropped by 60%.

This article is translated from Securities Star, author: Zhao Zixiang Another A-share listed company received a regulatory warning letter due to inaccurate performance forecast data. On May 30th, Rongsheng Petro Chemical (002493.SZ) announced that the company and related responsible persons received a warning letter from regulatory authorities due to accuracy issues in information disclosure. Securities Star noticed that Rongsheng Petro Chemical announced a "2023 Annual Performance Forecast" earlier this year, expecting a loss of 4 to 6 billion yuan in net profit after deducting non-recurring gains and losses in 2023. However, one month later, the company corrected this forecast, turning the loss into a profit. It is worth mentioning that this is not the first time that Rongsheng Petro Chemical's performance forecast information disclosure has been inaccurate. In 2023, the company faced regulatory measures due to improper income recognition and accounting errors in financial reports. In addition, the company's net profit in 2022 was 11.58 billion yuan, a year-on-year decrease of 65.33%, which raised questions from investors about the company's "increasing revenue without increasing profit" at the performance meeting. Significant discrepancies in performance forecasts The announcement shows that Rongsheng Petro Chemical and related personnel received a warning letter from the Zhejiang Securities Regulatory Bureau, with senior executives including the chairman, board secretary, general manager, and financial director. Specifically, on January 31, 2024, Rongsheng Petro Chemical disclosed the "2023 Annual Performance Forecast", expecting a loss of 4 to 6 billion yuan in net profit after deducting non-recurring gains and losses in 2023. On February 24, 2024, the company disclosed a "Revised Announcement on the 2023 Annual Performance Forecast", correcting the above amount to a profit of 8 to 10 billion yuan. The company's performance forecast information disclosure was inaccurate. Regarding the reasons for the performance correction, Rongsheng Petro Chemical stated that on December 22, 2023, the China Securities Regulatory Commission issued the "Interpretive Announcement No. 1 on Non-recurring Gains and Losses in the Information Disclosure of Publicly Issued Securities (Revised in 2023)" (hereinafter referred to as the "Interpretive Announcement"), which took effect from the date of publication. The listed company stated that the mistake was made due to a misunderstanding of the Interpretive Announcement, where government subsidies that met the conditions for regular gains and losses recognition were not classified as such, and a performance forecast was issued. Additionally, in accordance with the requirements of the Interpretive Announcement, the government subsidies that met the conditions for regular gains and losses recognition were reclassified, and the performance forecast was ultimately corrected. Rongsheng Petro Chemical stated that after receiving the "warning letter", the company and related personnel attached great importance to the issues pointed out in the "warning letter", and would strictly follow the requirements of the Zhejiang Securities Regulatory Bureau, learn from the lessons, continuously strengthen the study of securities laws and regulations, further improve and rigorously implement financial and accounting management systems, and enhance the management of information disclosure affairs. Warning letter for "accounting errors" was also received last year In fact, this is not the first time that Rongsheng Petro Chemical has been warned by regulatory authorities due to errors in financial data. Securities Star noted that in January 2023, just a year ago, Rongsheng Petro Chemical also issued an announcement titled "Announcement on the Company and Related Personnel Receiving a Warning Letter from the Zhejiang Securities Regulatory Bureau". The warning letter revealed that during on-site inspections, the regulatory authorities found that Rongsheng Petro Chemical had issues with the recognition of trade business income and accounting treatment in the 2020-2021 fiscal year. As a result, these actions violated multiple laws and regulations, and company chairman Li Shuirong, general manager Xiang Jiongjiong, financial director Wang Yafang, and board secretary Quan Weiying were in breach of the "Measures for the Administration of Information Disclosure of Listed Companies" (CSRC Order No. 40) Article 3, Article 58, among others, and should bear primary responsibility for the aforementioned violations. According to relevant regulations, the regulatory bureau decided to take supervisory measures of issuing warning letters to the individuals mentioned, and record them in the integrity file of the securities and futures market. In May 2023, the Shenzhen Stock Exchange also issued a regulatory letter to Rongsheng Petro Chemical, which mentioned, "On April 20, 2023, your company disclosed the '2022 Annual Report', indicating that the company corrected previous accounting errors, with accounting errors involving 53.26 billion yuan in operating income in 2020 and 74.23 billion yuan in operating income in 2021, accounting for 4.97% and 4.05% of the previously disclosed operating income amounts for those periods, respectively. Your company adjusted the errors in the 2022 financial statements, reducing operating income by 127.49 billion yuan in 2022, reducing operating costs by 127.49 billion yuan, with no impact on net profit in 2022." At that time, the exchange stated, "We hope that the company and all directors, supervisors, and senior management learn from the lessons, make timely corrections, and prevent the recurrence of the above problems." However, little did they know that just one year later, similar issues would happen again. Additionally, at the end of March 2023, Tianjian Accounting Firm was subject to supervisory interview by the Zhejiang Securities Regulatory Bureau due to inadequate execution of the financial statement audit for Rongsheng Petro Chemical, citing issues with "subsidized income audit discrepancies at subsidiary companies" and "PTA sales revenue audit discrepancies". Net profit down over 60% in 2023 According to the annual report, in 2023, Rongsheng Petro Chemical achieved a total operating income of 325.112 billion yuan, a year-on-year increase of 12.46%; net profit attributable to the parent company was 11.58 billion yuan, a year-on-year decrease of 65.33%; of which, non-recurring net profit was 8.20 billion yuan, a year-on-year decrease of 59.24%. In terms of products, in 2023, Rongsheng Petro CRefined oil products, chemical products, PTA, polyester film, trading and other products achieved revenues of 121.88 billion yuan, 1217.77 billion yuan, 531.90 billion yuan, 147.18 billion yuan, and 135.43 billion yuan respectively, accounting for 37.49%, 37.46%, 16.36%, 4.53%, and 4.16% of total revenues.At the performance briefing held in May by Rongsheng Petro Chemical, an investor asked, "The net profit attributable to shareholders of the listed company decreased by 65.33% compared to the same period last year. What are the main reasons behind this decline, and does the company have any plans to improve profitability in the future?" In response, the listed company stated that the main reason for the year-on-year decline in performance in 2023 was due to the continuous impact from the 3rd quarter of 2022 to the 1st quarter of 2023, caused by significant fluctuations in crude oil prices and relatively weak downstream demand prices. Securities Star noted that since the financial report was disclosed, the stock price performance of Rongsheng Petro Chemical has not been satisfactory in May. From May 8th to May 31st, the company's stock price fell from 11.54 yuan per share to 10.02 yuan per share, a decrease of 13.32%, just one step away from falling below the "double-digit" stock price. (This article was first published by Securities Star, author: Zhao Zixiang) This article was originally published by Securities Star, author: Zhao Zixiang.