Consumer Staples

Ausnutria Dairy (1717 HK)

Year: 2019

Chinese infant milk formula company Ausnutria Dairy listed on the Hong Kong Exchange in August 2009. In March 2012, Ernest & Young (EY) found discrepancies in the process of the FY11 audit. A subsequent investigation revealed that Ausnutria was fabricating sales and that certain officers tried to cover it up by doctoring the company’s books and records. The amounts were material, accounting for upwards of 40% of reported profit between FY09 and FY11. After being suspended for close to three years, the company's shares resumed trading in August 2014. Five years later, in August 2019, short-seller Blue Orca issued a report which, amongst other claims, alleged that Ausnutria was fabricating sales and hiding costs off-balance sheet. Ausnutria's financials have some traits similar to past frauds in that it is highly profitable but fails to return adequate amounts to shareholders; however, this might be due to its unusual corporate structure. Blue Orca's report failed to prompt any auditor or director resignations. As such, the allegations remain unproven.

Last updated June 2022.

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