The \"King of Potash Fertilizers\" enters bankruptcy reorganization; its market value has declined by over 30 billion yuan in two years

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The \"King of Potash Fertilizers\" enters bankruptcy reorganization; its market value has dropped by over 30 billion yuan in two years. Author/Source: Jiemian News. Date: 10-10-2019. Clicks: 15. Once a company with great success in the potash fertilizer industry, it now finds itself under the burden of debts exceeding 4 million yuan, forcing it to embark on a path of bankruptcy reorganization. 　　On October 8, according to a announcement issued by Qinghai State-owned Assets Investment and Management Co., Ltd., Qinghai Salt Lake Industry Co., Ltd. (000792.SZ, namely *ST Salt Lake, hereinafter referred to as Salt Lake Co.) received a civil ruling from the Intermediate People’s Court of Xining City, Qinghai Province (hereinafter referred to as Xining Intermediate Court). The ruling authorized the acceptance of the restructuring application filed by Golmud Taishan Industrial Co., Ltd. (hereinafter referred to as Taishan Industrial) against Salt Lake Co., and appointed a liquidation team to act as the administrator of Salt Lake Co. 　　Among them, Wang Liming, Vice Governor of Qinghai Province and Director of the Provincial State-owned Assets Supervision and Administration Commission, serves as the head of the liquidation team, while Hong Tao, Director of the Provincial Department of Industry and Information Technology and Deputy Director of the Provincial State-owned Assets Supervision and Administration Commission, acts as the deputy head. 　　On August 15, Yanhu Co., Ltd. received a \"Reorganization Application Notice\" from its creditor, Taishan Industry, due to the company’s failure to repay a debt of 4.39 million yuan to it. Taishan Industry previously provided equipment maintenance and staff catering services to Yanhu Co., Ltd. 　　Salt Lake Co., Ltd. was founded in August 1958 and is known as China’s \"king of potash fertilizers\"; it went public in 1997. It has won the 20th China Listed Companies’ top award, the \"Golden Bull Sustainable Growth Award\", becoming the only company in Qinghai Province to receive this honor. 　　According to the financial reports, Yanchi Salt Lake has experienced consecutive losses since 2017. It incurred a loss of 4.16 billion yuan that year, with its net profit dropping by 1,318.77% on a year-on-year basis; this was the first time the company has experienced an annual loss since it went public ； In 2018, it incurred another loss of 3.496 billion yuan. 　　In accordance with the regulations of the Shenzhen Stock Exchange, if a company incurs losses for two consecutive years, its stock will be subject to a delisting risk warning after the release of its annual report for 2018; in other words, it will be labeled with “*ST”. 　　In the first half of this year, Yanhu Co., Ltd. incurred a loss of 424 million yuan. 　　According to the financial reports, as of the end of June this year, Yanhu Co., Ltd. had total assets of 73.344 billion yuan and total liabilities of 55.087 billion yuan, resulting in a debt-to-asset ratio of around 75%. The company’s cash balance amounts to 1.346 billion yuan, with 353 million yuan in funds that are restricted in use; after deducting these restricted funds, the available funds on account are nearly 1 billion yuan. 　　There is still nearly 1 billion yuan in available funds on the accounts, and a debt-to-asset ratio of 75% is not considered high either. Why did Yanhu Co., Ltd. embark on the path of bankruptcy reorganization? 　　Chen Feifei, a senior financial analyst, told Jiemian News that the main issue that has overwhelmed Yanhu Co., Ltd. is its liquidity problem. 　　“Yanhu Co., Ltd. has a very low liquidity, with the majority of its funds tied up in fixed assets. ”Chen Feifei said. 　　According to the financial reports, Yanhu Co., Ltd. has current assets of 10.7 billion yuan and current liabilities of 34 billion yuan. 　　Chen Feifei said that this alone has caused a shortage of working capital. It has fixed assets, including factory buildings, worth over 50 billion yuan, but it is difficult to realize the value of these assets; as a result, the company ends up with a large scale of business yet still struggles to cover even a few million in debts. 　　Furthermore, Chen Feifei believes that Yanhu Co., Ltd. may also have off-balance-sheet liabilities, meaning the company has other hidden debts. 　　Misfortunes never come alone. On October 9, Qinghai Salt Lake Magnesium Industry Co., Ltd., a subsidiary of Yanchi Salt Lake Co., Ltd. (hereinafter referred to as Salt Lake Magnesium), also received an application from the relevant creditor companies for restructuring. 　　Yanhu Co., Ltd. stated that Yanjing Golmud Senhai Chemical Co., Ltd. (hereinafter referred to as Senhai Chemical) applied to the Xining Intermediate People’s Court for the restructuring of Yanhu Magnesium Industry on the grounds that the latter was unable to repay its due debts and its assets were insufficient to cover all of its obligations. 　　Yanhu Co., Ltd. stated that there is still significant uncertainty regarding whether the application will be accepted by the court and whether Yanhu Magnesium Industry will be able to enter reorganization proceedings. 　　Currently, Qinghai Provincial State-owned Assets Investment Management Co., Ltd., Sinochem Group Corporation, and China Cinda Asset Management Co., Ltd. are the top three shareholders of Salt Lake Shares, holding shares in the amounts of 27.03%, 20.52%, and 6.23% respectively. 　　In 2017, the share price of Yanhu Co., Ltd. reached its peak in almost two years, at 20.68 yuan per share; on September 27 of that year, its closing market value was 54.2 billion yuan. 　　As of the close on October 9, the share price of Yanhu Co., Ltd. was 8.33 yuan per share, up by 3.61% ； The market value is 23.208 billion yuan; compared to the end of September 2017, the market value has declined by 57%, amounting to over 30 billion yuan.