Baby-food producer Beingmate says it’s turning things around and that its stock market status should reflect it. But a closer look at its financials reveals questionable recent performance.

Well-known — some might say infamous — Beingmate has applied for the Shenzhen Stock Exchange to remove the “ST” (“Special Treatment”) label from its stock ticker. The ST tag denotes a company involving significant investment risk and poor fiscal performance.

Beingmate has been carrying an ST hat and a “delisting risk” warning since Apr. 27 of last year, after it reported losses of 780 million yuan ($116.28 million) and 1.06 billion yuan in 2016 and 2017, respectively.

But in a recent fiscal report it says its 2018 numbers deserve redemption.

The company’s audited 2018 net profit attributable to shareholders and equity attributable to shareholders as of Dec. 31 both turned positive to 41.11 million yuan and 1.82 billion yuan.

The problem, however, is that the earnings were not mainly driven by business growth but by selling assets, including equity of subsidiaries, and receiving government compensation. It sold 100% equity of a wholly-owned subsidiary, bringing the company 44.78 million yuan, and received over 100 million yuan in subsidies from the government in 2018. Neither of these may convince the exchange that Beingmate is back in good standing.

In fact, the company’s total sales revenue last year, including that for key segments milk power and rice cereals, dropped 6.38% year-on-year to 2.49 billion yuan, the fifth year in a row of declines.

Beingmate’s second-largest shareholder, global dairy leader Fonterra, may have reason to be concerned with the company’s profitability.

According to an announcement released on March 22, Zhu Xiaojing, Fonterra’s head of China operations, stepped down as Beingmate’s board member, prompting Chinese media to quote analysts asserting that Fonterra is lowering its priority of Beingmate-related projects.

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