Sino-Forest Corporation
Sino-Forest Corporation is a leading commercial forest plantation operator in China. Its principal businesses include the ownership and management of forest plantation trees, the sale of standing timber and wood logs, and the complementary manufacturing of downstream engineered-wood products.
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Sino-Forest responds to Globe and Mail article, calling it "incorrect"
Sino-Forest (TSE:TRE) responded Monday to an article published in the Globe and Mail on Saturday, which the company said inaccurately and incorrectly portrayed its business.
The article centred around a long-term purchase agreement in China's Yunnan province, where claims have been made against the commercial forest plantation operator that it overstated its assets. The agreement was signed between Sino-Forest and and Gengma Dai and Wa Tribes Autonomous County Forestry Ltd., also known as Gengma Forestry, in 2007.
Sino-Forest has long maintained that under the deal with Gengma, it has the right to acquire approximately 200,000 hectares of standing timber in the province over a 10-year period.
Sino-Forest said in a statement today that in total, through its subsidiaries, it has acquired 230,200 hectares of standing timber under the master agreement.
However, according to the Globe article, the newspaper spent the last two weeks around China with Xie Hongting, the chairman of Gengma Forestry, who said in an interview with the Globe that the transactions carried out by Sino-Forest to date have amounted to less than 14,000 hectares.
This is a significant discrepancy, as the Canadian forestry company, with much of its focus on China, has the rights to about 788,700 hectares of standing timber, making the Yunnan province a central part of its operations.
In a statement, the company said it believes there was a misunderstanding of its publicly disclosed acquisitions in Yunnan, for which Gengma acted as a purchasing agent to Sino-Forest and its subsidiaries.
"When asked in the interview how much [Xie Hongting] has sold to Sino-Forest, he accurately says he has sold the Company "almost 200,000 mu" (13,333 hectares) which represents land use rights on land provided by Gengma Dai and Wa and is an approximate total of the Company's land lease certificates in Yunnan," Sino-Forest said in a statement.
"In addition, Gengma Dai and Wa has sold standing timber for a total of another 34,667 hectares (520,000 mu) in Lincang City both as owner and as agent, and acted as an agent on another 182,867 hectares (2.743 million mu) elsewhere in Yunnan Province."
According to Sino-Forest, Mr Hongting was introduced by the company itself to the Globe in an open attempt to address some of the paper's questions. After the interview, Sino-Forest had its own background interview with the Globe, "during which it became clear there were some factual misunderstandings regarding the company's ownership of trees in Yunnan."
Sino-Forest said that instead of waiting for clarification and documents provided today, the Globe chose to go ahead with its planned article. The Globe said in an article today that it stands by its previous story.
The Canadian forestry company's legal and financial woes started in late May, as US-based research firm Muddy Waters publicized a report that stated Sino-Forest fabricated its timber sales and overstated its tree purchases in the Yunnan province.
As Sino-Forest pointed out, "Chinese business dealings are significantly different and more complex" than the North American environment.
In addition, the Globe referenced a Chinese official saying the company managed far less than 200,000 hectares, another claim it disputed today.
"The provincial level bureau records land ownership and land lease transactions, but does not separately record sales of standing timber. As publicly disclosed, the substantial majority of Sino-Forest's purchases are standing timber."
In yet another blow to the company's quickly declining reputation and stock, which fell 16.3% as of Monday at 1:21 pm EST, trading at $2.67 per share, Ontario-based law firms, Koskie Minsky LLP and Siskinds LLP have filed a class action suit against Sino-Forest in the Ontario Superior Court of Justice.
The action, filed on behalf of the Labourers' Pension Fund of Central and Eastern Canada, seeks $6.5 billion in damages, stemming from Sino-Forest's alleged mis-statement of its assets and results of its operations, in compliance with generally accepted accounting principles.
Other Sino-Forest Corporation news
- Sino-Forest shares surge 40% after US-based fund takes 11.5% stake
2011-07-04 - Sino-Forest grows fourth quarter profit by 52%
2011-03-16 - Sino-Forest ups holding in Omnicorp to majority stake
2010-06-23 - Sino-Forest acquires engineered wood production and research business in China
2010-01-12 - Toronto listed China forestry play set to benefit from Jiangxi deals
2009-06-19
