Kelon, once the biggest home appliance manufacturer in China, reported that its net loss grew to 3.7 billion yuan (US$464 million) from 246 million yuan (US$30.75 million) a year earlier.

Visitors look at Kelon air-conditioners at a recent electronics fair in Shanghai. Kelon, once the biggest home appliance manufacturer in China, reported that its net loss last year grew to 3.7 billion yuan from 246 million yuan a year earlier. [newsphoto]

In a statement to the Shenzhen Stock Exchange, Kelon said its sales fell 11 per cent to 7 billion yuan (US$875 million) from 7.9 billion yuan (US$987 million) last year.

The company's statement said that the huge loss was mainly a result of the halt in production after the China Securities Regulatory Commission (CSRC) launched a probe last April.

Kelon halted about half of its refrigerator production and 70 per cent of air conditioner output between May and September, the hot season for sales.

Meanwhile, the probe squeezed Kelon's cash flow by undermining the confidence of financial institutions, suppliers and sales agents in the company.

The CSRC's five-month investigation revealed that Kelon's sales were exaggerated by 122.1 million yuan (US$15.25 million) between 2002 and 2004, adding 33 million yuan (US$ 4.1 million) to the company's net income, the company said in the statement.

As a result, the CSRC fined Kelon 600,000 yuan (US$75,000) last month, and penalties ranging from 50,000 yuan (US$6,250) to 300,000 yuan (US$37,500) were slapped on the company's top management .

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