Guangdong environmental packaging giant faces risk of capital depletion

"Shuye Environmental Protection's fund lending and equity transfer transactions occupy a relatively large scale of funds; there is certain uncertainty in the recovery of the related payments, and the company faces considerable liquidity risk and debt pressure." - The environmental protection packaging giant in Guangdong is facing a huge crisis!

On May 14, China Chengxin Pengyuan announced that it would downgrade the long-term entity credit rating of Shuye Environmental Protection Technology Co., Ltd. (hereinafter referred to as "Shuye Environmental Protection") from AA- to A, and adjust the rating outlook from stable to negative.

Shuye Environmental Protection traces its origins to Chenghai Shuye Weaving Factory, and founder Lin Shuguang started out with simple woven bags. In 2008, upon deliberation and approval by the Shuye shareholders' meeting, the company was renamed Guangdong Shuye Environmental Protection Technology Co., Ltd., and Lin Shuguang began to move into environmental protection packaging. Shuye Environmental Protection is mainly engaged in film and packaging businesses, of which the film business is biaxially oriented polyester film (BOPET), and the packaging business focuses on eco-friendly shopping bags and express delivery bags.

After more than 20 years of development, Shuye Environmental Protection has grown from a small workshop into one of the leading environmental protection packaging enterprises in China, becoming a product supplier to internationally renowned companies such as Walmart and Carrefour. In recent years, Shuye Environmental Protection has been relatively active in the market for functional films, and products such as matte film, heat-seal film, laser film and iron-coating film have occupied a considerable share of the market.

In recent years, Shuye Environmental Protection's revenue has grown steadily and its profitability has been relatively stable; thanks to favorable market conditions and falling raw material prices, the company's overall gross profit margin increased slightly. In 2020, Shuye Environmental Protection achieved revenue of 804 million yuan, up 8.93% year on year, and net profit attributable to shareholders of the parent company of 56,270,400 yuan, down 4.05% year on year.

In 2019, Shuye Environmental Protection expanded capacity through self-built investment, finance-lease arrangements and outsourcing, adding a 50,000-tonne polymerization unit and PET polyester film production lines and other equipment. However, as the scale of external financing expanded, Shuye Environmental Protection's debt scale grew substantially, and its debt repayment pressure increased markedly, with concentrated repayment pressure being relatively high.

As of the end of 2020, Shuye Environmental Protection's total assets were 2.293 billion yuan, total liabilities 1.193 billion yuan and net assets 1.1 billion yuan, with a debt-to-asset ratio of 52.01%. In addition, Shuye Environmental Protection had 510 million yuan of non-current liabilities, mainly long-term borrowings and bonds payable, with its long-term interest-bearing liabilities totaling 334 million yuan. Overall, Shuye Environmental Protection had 827 million yuan of rigid debt, mainly short-term interest-bearing liabilities, with an interest-bearing debt ratio of 69%. With interest-bearing liabilities running high, Shuye Environmental Protection's financial expenses exceeded 30 million yuan in each of the past two years, significantly eroding the company's profits.

However, some encouraging news has also come from Shuye Environmental Protection. Recently, South Korean chemical company SK Chemicals said it plans to acquire a 10% stake in Shuye Environmental Protection for 23 billion won.

——This article is reprinted from China Packaging Network (pack.cn). Original link: http://news.pack.cn/show-377455.html