(Yicai Global) June 24 -- Henan Kedi Dairy’s parent Kedi Group has applied CNY1.86 billion (USD263.7 million) towards non-operating expenditures, an amount which was 118.26 percent of the company’s audited net assets over the past year, Kedi Dairy said in a statement yesterday following an internal audit.

The company has applied to the Shenzhen Stock Exchange to suspend its shares [SHE:002770] for one day from today and will resume trading when the market opens on June 29 after a four-day national holiday starts in China tomorrow. The company's stock abbreviation will change from Kedi Dairy to ST Kedi. ‘ST’-branded stocks have a 5 percent daily limit, while that for regular shares is 10 percent, per Chinese listing rules.

The firm, which is based in Shangqiu, in east-central Henan, will press its parent to raise funds however it can and draw up a repayment plan to reimburse the appropriated funds as soon as possible. Effective arrangements are in place to supply the company's capital needs for normal operations and thus no problems with its business will arise in the next 12 months, it said in yesterday's statement.

Last year, a court in eastern Shandong province froze Kedi Group’s assets, raising suspicions major shareholders had misappropriated funds, according to media reports.

The China Securities Regulatory Commission also probed the company for alleged violations, the firm said in an Aug. 16 statement that omitted further details. The investigation is believed to relate to the company’s non-payments to its dairy farmer suppliers' notwithstanding its CNY1.7 billion cash in hand.

More than 200 raw milk suppliers picketed Kedi Dairy on July 31 to demand the company make good on CNY140 million (USD19.84 million) in arrears for 19 months. Zhang Shaohua, the daughter of the company’s chairman, conceded its parent company was under great financial pressure in August, Yicai Global reported at the time.

Kedi Dairy's cash balance was CNY1.77 billion (USD250.3 million) in the first quarter of last year in a 5.9 percent rise from the end of 2018, per the company’s quarterly financial report.

Editor: Ben Armour