Shandong Chenming Paper Holdings has implemented production restrictions and shutdowns at some of its production bases since November 2024

Shandong Chenming Paper Holdings has implemented production restrictions and shutdowns at some of its production bases since November 2024

- In 2024, the prices of the Company’s major products continued to be low, with a year-on-year decline in gross profit
-The prices of the Company’s major paper products, in particular the price of white cardboard, have declined significantly under the influence of the supply-demand contradiction, leading to reduced profitability of the SCPHL

The Pulp and Paper Times

Over the past year, Shandong Chenming Paper Holdings Limited (SCPHL) has faced severe challenges. During FY 2024 ended on 31st December, the contradiction between supply and demand in the short term has been prominent due to the concentration of newly-added production capacity in the paper industry. The prices of the Company’s major paper products, in particular the price of white cardboard, have declined significantly under the influence of the supply-demand contradiction, leading to reduced profitability of the SCPHL, and incurring losses. At the same time, as some financial institutions downsized the loan scale, the Company faced temporary liquidity shortages, and thus the Company and some of its subsidiaries encountered instances of debt defaults. In response, some creditors have filed lawsuits against these debts in the court and simultaneously applied for property preservation, and the court has made a ruling to freeze some of the bank accounts of the Company and its subsidiaries.

“In 2024, due to factors such as production restrictions and shutdowns for maintenance, the Company produced 4.27 million tonnes of machine-made paper and sold 4.47 million tonnes of machine-made paper, achieving revenue of RMB22,729 million and a net profit attributable to the parent company of RMB-7,411 million, representing a significant decline as compared to the previous year. To reduce losses, the Company has implemented production restrictions and shutdowns at some of its production bases since November, along with maintenance of machinery and equipment. However, due to the fact that the shutdown and maintenance has exceeded three months, and the Company failed to resume large-scale production and operations, the Company’s A shares and B shares have been subject to other risk warnings by the Shenzhen Stock Exchange” Mr. Hu Changqing, Chairman of Shandong Chenming Paper Holdings said in the annual report for FY 2024.

In recent years, the contradiction between supply and demand in the short term has been prominent due to the concentration of newly-added production capacity in the paper industry. The prices of the Shandong Chenming Paper’s major paper products, in particular the price of white cardboard, have declined significantly under the influence of the supply-demand contradiction. The profit level of the Company has been decreasing, and has even turned from profits into losses. In 2024, the prices of the Company’s major products continued to be low, with a year-on-year decline in gross profit. Starting from the fourth quarter, the Company’s production bases in Shouguang, Zhanjiang, Jiangxi and Jilin had successively been in shutdown and maintenance, resulting in unsatisfactory capacity utilisation of the Company and a year-on-year decline in production and sales volumes.

Shandong Chenming made every effort to promote the resumption of operation and production. The Company established production resumption plans, conducted comprehensive overhauls across all production systems, improved automated detection and control functions, and enhanced equipment integrity and operational efficiency. Striving to achieve the resumption of operation and production within the shortest possible time, the Company also strengthened its communication and coordination with suppliers to foster stable long-term cooperative relationships between them. As of the date of this report, some production lines at Huanggang Chenming, Jiangxi Chenming and Shouguang Chenming have gradually resumed production and operations.

Company made every effort to revitalise and dispose of its existing assets. The Company strengthened the disposal of assets in its non-principal business, established an asset management center, adjusted and optimised internal management, divided asset disposal management areas by region, and assigned responsibilities to individuals to improve the efficiency of asset disposal. The Company also stepped up efforts to recover outstanding debts, and pursued debtors with realisable assets with priority given to negotiation means. For accounts receivable that are difficult to recover, the Company resorted to judicial channels to resolve the issues, and striving to improve its liquidity.

Mr. Hu Changqing further informed that Shandong Chenming made every effort to introduce strategic investments. A task force for the introduction of strategic investors has been set up. Dedicated personnel are responsible for engaging and negotiating with interested strategic investors and use flexible cooperation methods to effectively integrate resources. At the same time, the Company insisted on the approach of combining “going out” and “bringing in”, took the initiative to cooperate with competent enterprises, and acquired the necessary working capital for the resumption of production through a variety of channels, so as to support the Company in achieving normal production and operation as soon as possible.
 

Web Title: Shandong Chenming Paper Holdings has implemented production restrictions and shutdowns at some of its production bases since November 2024