Yihai Kerry Arawana: Key Developments from Investor Briefing on Major Legal Case

Date: November 21, 2025
Location: Shanghai Securities News – China Securities Online Roadshow Platform
Stock Code: 300999
Stock Name: Arawana

Overview

Yihai Kerry Arawana Holdings Co., Ltd (“Yihai Kerry Arawana”) recently held an investor briefing to address concerns regarding a first-instance court judgment wherein its subsidiary, Guangzhou Yihai Oils & Grains Industries Co., Ltd (“Guangzhou Yihai”), was found guilty as an accomplice in a high-profile contract fraud case. The summary below provides a comprehensive analysis of the proceedings, the company’s defense, and the potential impact on shareholders.

Key Points from the Report

• Legal Dispute: Guangzhou Yihai was found guilty in a first-instance judgment for complicity in contract fraud involving Anhui Huawen and Yunnan Huijia. The company is actively appealing the decision, arguing serious factual and procedural errors.
• Magnitude of Exposure: The court held Guangzhou Yihai liable for RMB 1.881 billion in damages. This sum, if enforced, could significantly impact the company’s financials and shareholder value.
• Nature of the Alleged Fraud: The case centers on a complex financing trade where Yunnan Huijia bribed Anhui Huawen’s executives to fabricate transactions, resulting in massive losses for the state-owned Anhui Huawen. The company contends that Guangzhou Yihai was itself deceived and victimized by the internal collusion, not a participant in the fraud.
• Company’s Defense Highlights:
  • Guangzhou Yihai claims it exercised due diligence in all transactions and did not benefit from any illicit activities.
  • Market evidence shows that all transactions were conducted at or above fair market prices, with no preferential treatment or financial gain from the alleged fraud.
  • The audit report used as critical evidence by the court is challenged for being biased, selectively using data, and being compiled by an unqualified team.
  • Physical and operational constraints make it implausible for Guangzhou Yihai to have stored over 1 million metric tons of palm oil as claimed by Anhui Huawen, given its tank capacity is only 160,000 metric tons, with less than 100,000 tons available for third parties.
• Procedural Violations:
  • The company alleges that it was not properly notified during various stages of the investigation and prosecution.
  • Key evidence, specifically the audit report, was withheld from the defense.
  • The trial was separated from co-defendants, and requests to have other defendants appear for cross-examination were denied.
  • These actions, the company argues, deprived it of basic litigation and defense rights.
• Expert Support: Seven leading Chinese criminal law experts unanimously concluded that Guangzhou Yihai’s conduct does not constitute contract fraud.
• Impact on Financials:
  • The potentially massive compensation, if upheld, could have a material adverse impact on the company’s profits and share value.
  • As of now, the first-instance judgment has not taken legal effect and the company is in the appeal period; thus, the financial impact is not yet realized.
• Corporate Governance and Internal Controls: The company asserts that it maintains strict internal control procedures and that the implicated individual, Liu Degang (former General Manager of Guangzhou Yihai), acted independently and against company policy.
• Shareholder and Investor Sentiment: The Kuok family, owners of Wilmar International (the parent company), emphasized their longstanding and substantial investment in China, totaling more than RMB 250 billion. They strongly deny any motive to compromise their reputation or business for a minor gain.
• Potential for Further Legal Action: If the second-instance court upholds the original verdict, the company intends to seek retrial with the Supreme People’s Procuratorate.
• Implications for Future Investment: The company highlighted concerns about the broader business and judicial environment in China, warning that judicial injustice at the local level could undermine investor confidence.

Details Critical for Shareholders and Potential Price Sensitivity

• Significant Legal and Financial Risk: The RMB 1.881 billion liability is a major contingent risk that could materially affect Yihai Kerry Arawana’s earnings and share price if the company loses the appeal.
• Judicial Uncertainty: The company’s strong stance on innocence, combined with procedural complaints and expert support, introduces uncertainty in the legal outcome, potentially leading to price volatility as the case progresses.
• Reputational Impact: The legal challenge and associated negative publicity may affect the company’s brand, relationships with state-owned enterprises, and attractiveness to investors.
• Business Environment Concerns: The company’s comments on the risk of local judicial injustice may resonate with foreign investors, potentially weighing on valuation multiples if perceived as systemic risk.
• No Current Effect on Profits: As the verdict is not yet effective, no provision has been made, but this situation could change abruptly depending on the appellate outcome.

Comprehensive Chronology and Company Arguments

The disputed business operations occurred from 2008 to 2014, with all goods shipped by July 2014. Anhui Huawen did not approach Guangzhou Yihai for further shipments until 2021, when it suddenly claimed 1.07 million tons of palm oil remained undelivered — a claim the company says is logistically impossible. During the intervening years, Anhui Huawen and Yunnan Huijia allegedly fabricated false inventory records to conceal the losses and mislead auditors.

The company insists that all title transfers were confirmed via multiple channels by authorized Anhui Huawen personnel, who themselves were part of the internal collusion. Original inventory confirmation letters sent by Guangzhou Yihai were received and subsequently destroyed by Anhui Huawen management to hide the true status of the shipments.

The company also highlights the absurdity of claims that over a million tons of palm oil could be stored for over a decade, given the shelf life of the product and the physical storage limitations.

Guangzhou Yihai’s internal controls, according to the company, were robust and complied with industry standards. The criminal acts of the former general manager were not representative of company policy or procedures, and any benefits he may have received were personal, not corporate.

Outlook and Forward-Looking Statements

The outcome of the appeal will be pivotal. A reversal could restore confidence, while an upheld verdict may trigger significant financial provisioning and a negative share price reaction. The company has signaled its willingness to escalate the matter to the Supreme People’s Procuratorate if necessary.

The management also expressed faith in the broader commitment of China to legal protections for foreign investment but warned that negative local judicial outcomes could undermine these efforts and influence future investment decisions.

Conclusion

Investor Caution: The legal dispute between Yihai Kerry Arawana and Anhui Huawen is a high-stakes issue with the potential to materially impact the company’s financial health, reputation, and market valuation. Investors should closely monitor developments in the appeal and be prepared for potential volatility. The company maintains its innocence and robust defense, but the risk of a substantial financial outflow remains until the case is resolved.

Disclaimer: This article is for informational purposes only and does not constitute investment advice. Investors should perform their own due diligence and consult professional advisors before making any investment decisions. The situation described involves ongoing legal proceedings, and outcomes may materially affect the company’s financial condition and share price.

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