Shenji Group Kunming Machine says faces delisting in Shanghai

HONG KONG, March 21 (Reuters) - Shenji Group Kunming Machine

Tool Co Ltd said on Tuesday it may be

forced to delist in Shanghai after failing to make a profit in

2016, which would mark its third consecutive year of losses.

The machine distributor also said in a statement issued

through the Hong Kong stock exchange that there was

"uncertainty" over whether it could disclose its 2016 annual

report on schedule as it may have breached financial regulations

some years back, possibly resulting in its 2013 net profit being

negative.

The company said it discovered that about 96 million yuan

($13.9 million) worth of inventory between 2013 and 2016 was not

real, adding that sales revenue in 2016 and previous years was

suspected of breaching accounting standards.

It said there was also an issue with early retirement

benefits for staff in 2013-2015.

The machine distributor had previously warned of a delisting

risk for its A Shares as it reported a loss for 2014 and 2015.

The A shares would be delisted if 2016 was also negative, it

added.

Trading in the company's shares was halted on Monday. The

stock plunged more than 14 percent in Hong Kong when trade

resumed on Tuesday. Its Shanghai shares fell more than 5

percent.

($1 = 6.9033 Chinese yuan renminbi)

(Reporting by Donny Kwok; Editing by Richard Pullin)