Auditors add to doubts on Crafar farms buy

May Wang's company has already received money from Natural Dairy. Photo / Natalie Slade

The Chinese company vying to buy more than a dozen Crafar dairy farms has been a dealt a further blow, with its auditors raising questions about the true value of its investments in New Zealand.

Hong Kong firm Morison Heng has refused to fully sign off Natural Dairy's latest accounts, saying it is unable to give a "true and fair view" of Natural Dairy's affairs because of a lack of "reliable financial information".

The accounts have been announced a month late and reveal that the company, which is listed on the Hong Kong Stock Exchange, made a loss of HK$203 million ($34.12 million) for the 14 months ending in May.

Its auditor says it was unable to ascertain the fair value of Natural Dairy's New Zealand investments, so was unable to say if the accounts were "free from material misstatement".

Natural Dairy has agreed to pay $500 million to a company associated with Auckland businesswoman May Wang if the Crafar deal goes ahead.

But it is still unclear exactly how much money Natural Dairy has already given to Wang's company, UBNZ Assets, and how much more it is likely to pay.

According to the accounts, Natural Dairy has so far given UBNZ just under $110 million, including a $50 million deposit and a $60 million loan.

Only $50 million of the loan is due to be paid back if the deal falls over. But the auditors have questioned whether Natural Dairy would necessarily be able to recover that money should the deal fall through.

In June, a High Court judge also raised questions about the complex deal, which he described as "almost incomprehensible". One possible interpretation was Natural Dairy would not have to pay any more money to UBNZ, regardless of the outcome, he said.

The Serious Fraud Office has since announced it is investigating the transactions related to the deal.

Natural Dairy has told shareholders the SFO investigation does not directly relate to the company. SFO head Adam Feeley said yesterday that was "technically" correct, as the SFO tended to investigate individuals, rather than companies.

Meanwhile, the accounts show Natural Dairy is relying heavily on its foray into New Zealand to improve its fortunes.

Following a reverse takeover last year by Auckland businessman Jack Chen, the company has shifted its focus from mining to food.

It has told shareholders it decided to get into the dairy business after margins in its other food business dropped from 40 per cent to 2 per cent.

"In the long term, the management is confident that the introduction of quality New Zealand dairy products into China will bring a promising investment value for our shareholders," the company said.

The company has noted that it raised HK$868 million during the year. Its shares have been suspended from trading for most of the year, awaiting further details of its plans.

Its auditors say the latest result cannot be compared to the previous year, as its previous results were vetted by a different auditor, which had expressed concern about the "limitations on the scope of the audit" it was asked to do.