Packaging / Advertising & Office

"Shuye's environmental protection fund borrowing and equity transfer transactions occupy a large scale of funds, and there is a certain degree of uncertainty in the recovery of related funds, and it faces greater liquidity risks and debt pressure."-Guangdong's environmental protection packaging giant is facing a huge crisis!

On May 14, China Securities Pengyuan announced that the long-term credit rating of Shuye Environmental Protection Technology Co., Ltd. (hereinafter referred to as "Shuye Environmental Protection") was downgraded from AA- to A, and the rating outlook was adjusted from stable to negative.

The predecessor of Shuye Environmental Protection was Chenghai Shuye Knitting Factory. The founder Lin Shuguang first started with simple woven bags. In 2008, after deliberation and approval by the Shuye shareholders meeting, the company was renamed Guangdong Shuye Environmental Protection Technology Co., Ltd., and Lin Shuguang began to get involved in environmental protection packaging. Shuye Environmental Protection is mainly engaged in film and packaging business. The film business is biaxially oriented polyester film (BOPET), and the packaging business is mainly environmentally friendly shopping bags and express bags.

After more than 20 years of development, Shuye Environmental Protection has grown from a small workshop to one of the leading environmental packaging companies in China, and has become a product supplier for Wal-Mart, Carrefour and other internationally renowned companies. In recent years, Shuye Environmental Protection has been relatively active in the functional film market, and products such as matte film, heat-sealing film, laser film, and iron-coated film have occupied a large share of the market.

In recent years, Shuye's environmental protection revenue has grown steadily and its profitability has been relatively stable. Thanks to the good market conditions and the decline in raw material prices, the company's overall gross profit margin has increased slightly. In 2020, Shuye Environmental Protection achieved revenue of 804 million yuan, a year-on-year increase of 8.93%; realized a net profit of 56.2704 million yuan attributable to the parent, a year-on-year decrease of 4.05%.

In 2019, Shuye Environmental Protection expanded its production capacity through investment in self-construction, financial leasing, and outsourcing, and added 50,000 tons of polymerization equipment and PET polyester film production lines. However, with the expansion of external financing, the scale of Shuye's environmental protection liabilities has increased significantly, and the pressure on debt repayment has increased significantly and the pressure on centralized repayment is greater.

As of the end of 2020, Shuye Environmental Protection's total assets were 2.293 billion yuan, total liabilities were 1.193 billion yuan, net assets were 1.1 billion yuan, and the debt-to-asset ratio was 52.01%. In addition, Shuye Environmental Protection has 510 million non-current liabilities, mainly long-term loans and bonds payable, and its long-term interest-bearing liabilities total 334 million yuan. On the whole, Shuye's environmental protection rigid debt is 827 million yuan, mainly short-term interest-bearing debt, with an interest-bearing debt ratio of 69%. Interest-bearing liabilities are high, and the environmental protection financial expenses of the tree industry in the past two years have exceeded 30 million, which has greatly eroded the company's profits.

However, some exciting news has also come out of Treant Environmental Protection. Recently, South Korean chemical company SK Chemical stated that the company intends to acquire a 10% stake in Shuye Environmental Protection Company for 23 billion won.