Shocking! Xiamen grain and oil giant 'Zhongsheng' applies for bankruptcy reorganization Recently, the Xiamen Intermediate People's Court issued a notice publicly soliciting for a reorganizer for Zhongsheng Grain and Oil Group after its bankruptcy. ▲ Screenshot of the newspaper page of Fujian Daily If you don't know this well-known Xiamen private enterprise, then you must know 'Shengzhou' cooking oil, a household name across the country. I believe many friends have it in their kitchens. ▲ Online image A renowned local star enterprise in Xiamen, known nationwide Holding over 65% of the Xiamen market share Zhongsheng Grain and Oil Group was founded by Huang Wenchuan from Tong'an in 1993 In March 1993, an enterprise named 'Zhongsheng Grain and Oil' was established in Tong'an. Its factory had 10 mu of land, an investment of 7 million yuan, and complete supporting infrastructure, making its mark in the vast market of the southeast coast. ▲ Archive image ▲ 'Shengzhou' products on supermarket shelves More than 20 years have passed, and the dream of Huang Wenchuan and Zhongsheng Grain and Oil seems to have been realized. After more than 20 years of hard struggle, 'Shengzhou' cooking oil has a total cumulative investment of about 2.4 billion yuan, an annual comprehensive production capacity of about 630,000 tons, an output value of about 5 billion yuan, holding about 30% of Fujian Province's and over 65% of Xiamen City's cooking oil market share. Public data shows that Zhongsheng Group and the 'Shengzhou' brand have received numerous honors. Not only was it recognized as the eighth batch of provincial key leading enterprises in agricultural industrialization last year, but it was also awarded the '2015 Fujian Famous Brand Product' title by the Fujian Provincial People's Government in 2016. In addition, the enterprise has been honored as 'National Key Leading Enterprise in Agricultural Industrialization'; 'Top 10 Edible Vegetable Oil Processing Enterprises in China'; 'One of 25 Outstanding Contributing Enterprises in the 25th Anniversary of Xiamen Special Economic Zone'; and 'Most Influential Livelihood Brand' for the 30th anniversary of the Xiamen Special Zone. ▲ Screenshot of Zhongsheng Grain and Oil Group's official website Perhaps no one expected that disputes, debts, bankruptcy, and reorganization would suddenly befall Zhongsheng. On September 18, 2018, the Xiamen Intermediate People's Court issued a bankruptcy notice, announcing to the public that Zhongsheng had entered the judicial process of bankruptcy reorganization. After several months of property investigation, creditor registration, and asset value assessment, on December 6, the Xiamen Intermediate Court issued another notice, publicly soliciting reorganizers for Zhongsheng after its bankruptcy from both domestic and overseas sources. Once glorious and dazzling, now, with the court's notice, this Xiamen grain and oil giant has collapsed. What exactly did it go through? Debt soars to 3 billion yuan After investigation, reporters found that the soaring debt might be the most direct factor in Zhongsheng's collapse It is reported that the Xiamen Intermediate Court designated Fujian Xufeng Law Firm (hereinafter referred to as Xufeng) and Fujian Zhonghao Accounting Firm (hereinafter referred to as Zhonghao) as joint administrators for the Zhongsheng bankruptcy reorganization case. The reorganization investor recruitment announcement published by Xufeng and Zhonghao shows that Zhongsheng Group's existing assets (including its subsidiaries) are approximately 680 million yuan, mainly consisting of real estate and intangible assets such as brand trademarks. At the same time, its total liabilities (only including subsidiary Xiamen Shengzhou Vegetable Oil Co., Ltd.) amount to as high as approximately 3 billion yuan, with a debt-to-asset ratio of nearly 400%. ▲ Screenshot of the public solicitation for reorganizers announcement On July 20 this year, a court hearing exposed the hidden financial crisis of Zhongsheng Group to the public. At this hearing held at the Xiamen Intermediate Court, China Construction Bank Tong'an Sub-branch sued Zhongsheng Group for overdue loans, totaling approximately 4.23 million US dollars in principal and interest, and approximately 16.502 million yuan in RMB principal and interest. In the end, the plaintiff, CCB, won the case, and Zhongsheng's request to the court for a 4-month grace period to raise funds was not granted by the court. In addition, a reporter from Haixi Morning Post learned that Zhongsheng's 7.35 million shares in Xiamen International Bank had previously been publicly auctioned by Bank of Communications on the Alibaba auction platform, fetching 34.7 million yuan, which would be used to repay bank debts first. The recruitment announcement also shows that almost all real estate, trademarks, machinery and equipment assets of Zhongsheng Group and its subsidiaries are mortgaged. After reviewing the financial data officially published by Zhongsheng Group, reporters found that 2017 was a key turning point. In the years before that, 2014, 2015, and 2016, Zhongsheng's debt level was relatively stable, hovering around 500 million yuan. But by the end of 2017, Zhongsheng's total liabilities suddenly soared to 1.32 billion yuan, while total assets were about 900 million yuan, with debt exceeding assets for the first time. A private enterprise founded in the 1990s having weathered 25 years of ups and downs Why did it go bankrupt? This has become a question lingering in people's minds. Production costs and funding pressure doubled According to the reorganization investor recruitment announcement issued by Xufeng and Zhonghao, the original head of Zhongsheng Group stated that Zhongsheng's predicament was caused by two reasons: Reason 1 From 2007 to 2011, the cooking oil market underwent three macro-control measures, and 'Shengzhou' cooking oil in small packages was subject to price caps, causing Zhongsheng to lose approximately 900 million yuan. The recruitment announcement also disclosed specific data, mentioning that the price caps led to a cost-price inversion for Zhongsheng, resulting in losses of 200 million yuan; in addition, Zhongsheng bore loan interest of approximately 280 million yuan from 2008 to 2015, and lost an additional expected price increase profit of approximately 400 million yuan over 4 years. Reason 2 Due to banks tightening credit, Zhongsheng faced liquidity strain, ultimately unable to cover the deficit. The analysis states that from the second half of 2015 to 2016, multiple banks reduced their credit limits to Zhongsheng, from a maximum of 2.6 billion yuan down to 1.7 billion yuan, a decrease of as much as 35%, significantly impacting Zhongsheng's cash flow. The reasons for Zhongsheng Group's difficulties have also been confirmed. A reporter learned yesterday from an executive who requested anonymity: " Zhongsheng Group has always focused on the cooking oil market, and it was precisely because of price caps and tightened loans that the company's costs suddenly increased, and funding pressure doubled. In addition, the reporter's investigation found that unfair and vicious competition may have also eroded Zhongsheng's market share, causing consumers to be unable to distinguish the authenticity of the 'Shengzhou' brand. "On August 10, 2017, Zhongsheng accused Fujian Xinhai Oil Co., Ltd. (hereinafter referred to as Xinhai) of misappropriating the unique name and packaging of the 'Shengzhou' brand, causing huge damage to Zhongsheng. The Longyan Intermediate People's Court ultimately found that Xinhai's brand 'Jinxiangyu' did indeed constitute infringement, and ordered Xinhai to compensate Zhongsheng 200,000 yuan. Currently, production and operations are normal and orderly Currently, Zhongsheng is soliciting reorganization investors. The reporter learned that Zhongsheng Group's future is still promising. ▲ Screenshot of Zhongsheng Grain and Oil Group's official website The recruitment announcement points out that 'Shengzhou' cooking oil is the only national brand of cooking oil created locally in Xiamen City and Fujian Province. In March 2016, according to an evaluation by Beijing Zhonghengzheng Asset Appraisal Co., Ltd., the brand value of the 'Shengzhou' trademark was once as high as 4.16 billion yuan. The 'Shengzhou' blended oil series is the flagship product of Zhongsheng Group. Industry insiders point out that Zhongsheng Group and Shengzhou Company have complete production and operation conditions, a reasonable personnel structure, strong brand value, and stable market sales channels. If a strong reorganizer is introduced, it is possible for them to regain their former glory. The reporter learned that during the bankruptcy reorganization period, the production and operations of the two companies are normal and orderly. Source: Haixi Morning Post, Image Xiamen -END- Good article! Don't forget to click 'Like'