Bloomberg News

Sino-Forest Says Investigation Will Affect Tree Acquisitions

June 14, 2011

(Updates with CEO comment in second paragraph.)

June 14 (Bloomberg) -- Sino-Forest Corp., the Chinese timber grower that plunged 73 percent in Toronto trading after short seller Carson Block said it overstated production, said the findings of an investigation won’t be ready for at least two months.

“Sino-Forest’s business will be affected in the short term, as the Company will be devoting much of its resources to work with external professionals in Canada, Hong Kong and mainland China,” Chief Executive Officer Allen Chan said today in a statement. “Given the negative impact, management expects the pace of tree acquisition to be adversely affected.”

Sino-Forest has plunged in Toronto since Muddy Waters LLC, founded by Block, said in a report published June 2 that Sino- Forest is a “fraud” and said the company overstated its timberland concessions in China. Sino-Forest has denied Muddy Waters’ assertions, calling the report “inaccurate, spurious and defamatory.”

“It’s going to take a long, long period for them to rebuild confidence,” Jeff Papp, a Lisle, Illinois-based analyst at Oberweis Asset Management Inc., which manages about $800 million, said in a telephone interview before the results were released. “Right now people don’t think the company really exists based on where the stock is trading.”

Sino-Forest rose 48 cents, or 11 percent, to C$4.98 yesterday in Toronto Stock Exchange trading. The shares of the Hong Kong- and Mississauga, Ontario-based Sino-Forest have declined 79 percent this year, the worst performance on the S&P/Toronto Stock Exchange Composite Index.

The company said it had a first-quarter loss of 8 cents a share, compared with net income of 7 cents a year earlier. Excluding a charge of about 22 cents related to conversion to International Financial Reporting Standards, profit was 13 cents. That missed the 21-cent average of six analysts’ estimates in a Bloomberg survey.

(Sino-Forest’s conference call at 8:30 a.m. New York time can be accessed at {LIVE <GO>}. Callers in North America can dial +1-647-427-7450, or call toll-free at +1-888-231-8191. From Hong Kong, dial +1-647-427-7450.)

--Editors: Steven Frank, Simon Casey.

To contact the reporters on this story: Sonja Elmquist in New York at selmquist1@bloomberg.net; Christopher Donville in Vancouver at cjdonville@bloomberg.net.

To contact the editor responsible for this story: Simon Casey at scasey4@bloomberg.net.


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