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Chinese courier says allegations it inflated profit margins have no merit

  • ZTO Express has been sued by Birmingham Retirement and Relief System for allegedly inflating its profit margins to lure investors into its IPO
  • The company's chief financial officer, James Guo, said the allegations have no merit
  • ZTO's $1.4 billion listing in the U.S. was the largest in 2016, according to Reuters

Chinese logistics company ZTO Express said Tuesday the allegations by a U.S. pension fund that it exaggerated its profit margins have no merit.

The company was sued by Birmingham Retirement and Relief System. The pension fund alleged that ZTO left out certain low-margin business segments from its financial statements in order to inflate overall profit margins to lure investors into its initial public offering in 2016.

ZTO's $1.4 billion listing in the U.S. was the largest that year, according to Reuters. The company counts e-commerce giants Alibaba and JD.com as its customers.

"We don't think those allegations have any merits, we'll defend ourselves rigorously. We have engaged U.S. lawyers to help us, to protect the rights of the company," James Guo, ZTO's chief financial officer, told CNBC at the Morgan Stanley China Technology, Media and Telecomm Conference in Beijing.

Despite the ongoing lawsuit, the company has continued to outpace the industry's average volume growth in China, Guo claimed without revealing numbers. He said, however, the company processed more than 100 million orders on Singles Day last year — among the highest volume handled by a courier in the country.

Singles Day, started as a kind of anti-Valentine's day for singles, has become one of the largest shopping events in the world along with Black Friday and Cyber Monday.