Shenwu responds to financial concerns: The group and its subsidiaries operate in compliance with regulations

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On the evening of May 30, Shenwu Group issued a statement stating that the stock prices of its two listed companies, Shenwu Environmental Protection and Shenwu Energy Saving, were experiencing abnormal fluctuations. The group attaches great importance to this matter and has issued a statement stating that it, along with its listed subsidiaries, has always adhered to lawful and compliant operations since its establishment, and has strictly carried out internal and external audit processes to ensure the orderly conduct of the company’s business management. Shenwu Group will strictly comply with regulatory requirements, urge the two listed companies to actively cooperate with the regulatory authorities in completing the relevant responses, and take practical actions to safeguard the interests of investors. Shenwu Group states that it continuously strengthens the research, development, and promotion of energy-saving, low-carbon, green, and circular technologies in its efforts for development. Many of its innovative technologies have been successfully applied in various projects; they have been designated as key projects for promotion by local authorities, and have been recognized by relevant authoritative bodies as being at an \"international leading level.\" These technologies are contributing to changing China’s energy and resource landscape, reducing air pollution, and helping to address global climate change. For example, Shenwu Environmental Protection provides solutions for energy-saving and environmental protection systems in high-energy-consuming sectors such as calcium carbide, while Shenwu Energy Saving offers such solutions for high-energy-consuming and highly polluting industries such as those in the non-ferrous metals sector. Demonstration projects in these areas have already been put into operation, and the performance of the related downstream enterprises has seen significant improvement. Shenwu Group also stated in its declaration that over the past 20-plus years, the group and its listed companies have sincerely accepted supervision from all sectors of society, strictly complied with relevant laws and regulations, and taken proactive responsibility for their social obligations. In the future, the group will devote all its efforts to strengthening the two listed companies it owns, in order to generate greater returns for investors. It will also contribute to China’s efforts in energy conservation and emission reduction, the transformation and upgrading of the manufacturing sector, the Belt and Road Initiative, as well as ensuring **energy security. On the evening of May 24, Yetan Finance published an article titled “Shenwu Group: I’m sorry, Jobs – I used your tactics to fulfill your dream!” The article in question questioned whether Shenwu Group was using related-party transactions in a manner similar to LeEco; as a result, on the 25th, Shenwu Group’s two listed companies, Shenwu Environmental Protection and Shenwu Energy Saving, both saw their stock prices drop to the lowest level allowed, despite the negative market trends. Regarding Shenwu Environmental Protection, Ye Tan said: Dating without the intention of getting married is nothing but mischief; net profits that lack cash flow support are nothing but nonsense. In 2016, Shenwu Environmental Protection achieved a net profit of 708 million yuan, but its operating net cash flow was only 218 million yuan. Shenwu Group, since your subsidiaries all obey you like pieces on a chessboard, I hope you’ll show some sincerity as well; otherwise, Jobs will be even more disappointed. As for Shenwu Energy Saving, the article states that its performance in 2016 was driven primarily by Indonesian company PT Great River Nickel Alloy, which generated revenue of 637 million yuan, accounting for 73.66% of the company’s total annual revenue. Moreover, this company had a higher gross profit margin, at 39.77% higher than that of Shenwu Energy Saving’s domestic operations. But despite contributing so much in terms of sales, this company refuses to pay up; its debts amount to 512 million, accounting for 80.38% of the revenue it has generated. In other words, Shenwu Energy Saving has not received payment for over 80% of its sales! Nevertheless, the stock price of Shenwu Energy Saving still doubled in 2016.