8.3 billion loss, 6.4 billion in overdue debt! Can the former paper industry leader "come back to life"?

Invest in stocks with Jin Qilin analyst report—authoritative, professional, timely, and comprehensive—helping you uncover potential thematic opportunities!

Source: Shanhe Capital Circle

Author: Shanhe Capital Circle

From an industry leader to being put under ST measures, from listing across three regions to being entangled in debt, this Shandong paper-making giant’s “darkest hour” is still ongoing.

On the evening of March 30, ST Chenming (000488.SZ) disclosed a batch of announcements. The loss of 8.296 billion yuan disclosed in its 2025 annual report, net assets of 904 million yuan, and the steadily rising amounts of overdue debts and litigation are all pointing to the risks faced by this long-established paper enterprise.

Nearly 8.3 billion yuan in losses

Public information shows that ST Chenming’s predecessor was the Shouguang County Paper Mill established in 1958. It was once a leader in China’s paper industry and the first company in the industry to achieve listings in the A/B/H share markets across three locations. The company’s controlling shareholder is Chenming Holding Co., Ltd. Its nature is a local state-owned holding legal entity. The legal representative is Jiang Yanshan, and the actual controller is the Shouguang Municipal State-owned Assets Supervision and Administration Bureau.

In 2025, due to a broken capital chain and large-scale shutdown of capacity, the company was put under ST, falling into its “darkest hour.”

Since then, ST Chenming’s operating situation has taken a sharp downward turn. The 2025 annual report shows that in the full year, the company recorded operating revenue of 6.187 billion yuan, down 72.78% year over year. Net profit attributable to shareholders was a loss of 8.296 billion yuan, down 11.94% year over year.

In addition, the announcements show that as of December 31, 2025, the company’s consolidated statement of undistributed profits was a loss of 7.675 billion yuan, and paid-in capital was 2.935 billion yuan. The amount of accumulated losses not covered yet has already exceeded one-third of the paid-in capital.

The losses in 2025 did not arrive suddenly. The annual report shows that the company had already been in the red by 7.411 billion yuan in 2024. In 2025, the loss amount further widened to 8.296 billion yuan.

The root causes of the losses come from two aspects.

The first is the shutdown on the production side. In 2025, although the Huanggang production base of the company maintained normal production, the three major production bases in Shouguang, Jiangxi, and Jilin were basically in a shutdown state in the first three quarters. The Zhanjiang production base was shut down throughout the year. During the stoppage, the losses from the downtime and the costs for maintenance and overhauls increased year over year. As a result, the production volume and sales volume of machine-made paper fell significantly. For the whole year, the production volume of machine-made paper was only 1.09 million tons, and the sales volume was 1.0 million tons, down 74.47% and 77.63% year over year, respectively.

The second is the provision on the asset side. Affected by the shutdown, the company made impairment provisions for certain assets. Meanwhile, to focus on its pulp and paper main business, the company disposed of all assets related to its financial leasing business in the fourth quarter of 2025. In accordance with accounting standards, the company conducted impairment tests on the credit status of leasing customers and made bad debt provisions for some financial leasing businesses.

With these two factors combined, the company’s total operating costs in 2025 reached as high as 11.086 billion yuan, far exceeding operating revenue. Among them, credit impairment losses were 2.095 billion yuan, asset impairment losses were 556 million yuan, and investment income losses were 1.549 billion yuan.

Net assets evaporate by 90%

The direct consequence of the massive loss is the rapid shrinkage of net assets.

At the end of 2025, the net assets attributable to shareholders of the listed company were 904 million yuan, compared with 9.156 billion yuan at the end of 2024, a sharp drop of 90.13%. At the end of 2023, it was even higher at 16.692 billion yuan. In just two short years, the company’s net assets have evaporated by more than 15.7 billion yuan.

The steep decline in net assets has greatly magnified the company’s various risk indicators.

The “Announcement on Cumulative Newly Incurred Overdue Debts and Litigation Cases” published by the company on the same day shows that as of March 30, 2026, the company and its controlling subsidiaries’ cumulative newly incurred overdue debt amount had increased by 1.644 billion yuan compared with the end of March 2025. This figure accounts for 181.86% of the company’s most recent audited net assets. There are 239 newly filed lawsuits, with a case amount of 2.260 billion yuan, accounting for 250.07% of the company’s most recent audited net assets.

According to the annual report, ST Chenming is actively pushing forward debt restructuring and has proactively negotiated with banks and financial leasing companies regarding interest-rate reductions and extension matters. By the end of the reporting period, among the 109 banks and financial leasing companies cooperating with the company, 90 had agreed to implement interest-rate reductions or extension arrangements, which could save more than 600 million yuan in annual finance costs.

Even so, the issue of overdue debt has not been fundamentally alleviated. The announcement shows that by the end of 2025, the total overdue amount was basically the same as at the beginning of the year. Among them, the overdue amounts owed to banks, financial leasing, supply-chain-related institutions, etc., decreased by 330 million yuan. Most financial institutions’ overdue debts have reached settlements, but the pressure from overdue debts still remains.

To ease funding pressure, ST Chenming obtained support from the government and financial institutions. The governments at the two levels of Weifang and Shouguang took the lead in setting up state-owned companies and promoting the use of 2.31 billion yuan in special syndicated loans for the company to resume work and production. By the end of 2025, the loan had already been approved, and 1.652 billion yuan had been disbursed. Jilin Bank also provided a 217 million yuan special credit line to Jilin Chenming, with 118 million yuan already disbursed.

More than 6.4 billion yuan in lawsuits weighs heavily

A broken capital chain and overdue debts directly triggered numerous lawsuits and arbitration disputes, further intensifying ST Chenming’s operational difficulties.

According to the company’s announcements, in 2025, ST Chenming and its controlling subsidiaries were involved in multiple lawsuits and arbitration cases, covering legal-expected debt repayment documents and winding-up petitions, as well as various disputes in which they acted as plaintiffs and defendants, with enormous amounts involved.

Among them, Arjowiggins HKK2 Limited had filed a winding-up petition with the High Court of Hong Kong, with a case amount of 38,911.24 million HKD. Although the court ultimately dismissed the petition, it also reflected the pressure faced by the company’s offshore debts.

By the end of 2025, as plaintiffs, the company and its controlling subsidiaries had unresolved cases with a case amount of 79.4373 million yuan, and resolved cases with a case amount of 88.5690 million yuan. As defendants, the company had unresolved cases with a case amount of 248,106.57 million yuan, and resolved cases with a case amount of 398,293.48 million yuan. The total case amount exceeded 6.4 billion yuan.

Litigation disputes not only consume large amounts of human resources, material resources, and financial resources, but may also lead to the freezing of the company’s assets and the sealing of accounts, further affecting normal production and operations. The annual report shows that the company has accrued estimated liabilities of 5.935 million yuan for some matters involved in lawsuits. If there are additional lawsuits later or if the progress of existing lawsuits is unfavorable, the company’s financial burden will further increase.

For ST Chenming, 2026 will be a key year for breaking the deadlock and achieving rebirth. Whether it can continue to promote cost reduction and efficiency improvement, revitalize assets, and optimize its debt structure; whether it can restore its profitability by leveraging opportunities arising from an industry recovery; and whether it can rebuild brand credibility and stabilize market share—will determine whether this former industry leader can get out of its predicament and be reborn. Shanhe Capital Circle will continue to keep a close watch.

33 billion yuan divests financial assets, the former paper giant “cuts off an arm to survive”!

Massive information and precise interpretation—available on Sina Finance APP

Responsible editor: Yang Hongbu