A. O. Smith denies allegations of its operations in China

Source: Xinhua| 2019-05-19 09:32:08|Editor: ZX
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NEW YORK, May 18 (Xinhua) -- U.S. water heater and boiler manufacturer A. O. Smith Corporation Friday said that the allegations by investment research firm J Capital Research about its business operations in China are inaccurate, unfounded and misleading.

J Capital Research said it is short selling A. O. Smith shares in its report issued on Thursday saying that A. O. Smith has handed its Chinese business over to UTP without disclosing this to investors.

The allegations by J Capital Research on governance of its Chinese operations on Thursday are designed to negatively impact A. O. Smith's share price for J Capital's own benefit, said A. O. Smith in a statement.

All revenues associated with its Chinese third-party supply chain partner Jiangsu UTP Supply Chain Group Co., Ltd. and others were appropriately recognized in accordance with U.S. generally accepted accounting principles (GAAP) in its financial statements, it said.

"While we value all of our distribution relationships, we do not have debt or equity interests in UTP and maintain appropriate independent commercial agreements," said the statement.

According to J Capital Research, A. O. Smith failed to disclose undergoing sharp decline of sales, over-reported sales, under-reported inventories since at least 2015 and used its cash balance for loans to UTP.

J Capital Research concluded that A. O. Smith has major governance problems both inside and outside China and assigned 22.68 dollars per share of target price to A. O. Smith shares listed on New York Stock Exchange.

The price of A. O. Smith shares closed at 43.85 dollars per share on Friday, slipping 8.9 percent in the last two trading sessions mainly due to the report by J Capital Research.

A. O. Smith reported 232.1 million dollars of sales revenues in operations outside of the United States in the first quarter of 2019, down by 21 percent year-on-year, while total sales revenues slid 5.1 percent to 748.2 million dollars in the quarter.

Headquartered in the U.S. state of Wisconsin, A. O. Smith specializes in manufacturing of residential and commercial water heating equipment and boilers, as well as water treatment and air purification products.