---
title: "End of Zhao Shuanglian Era at COFCO: 380 Billion Liabilities Await Resolution"
description: "COFCO Biochemical's 8.2 billion yuan restructuring was approved; Zhao Shuanglian stepped down as chairman of COFCO Group; in 2016, COFCO Group reversed its performance decline. On July 17, COFCO Biochemical announced that SASAC had approved the restructuring plan, and the anti-monopoly review cleared the deal."
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published: "2018-07-28"
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# End of Zhao Shuanglian Era at COFCO: 380 Billion Liabilities Await Resolution

> COFCO Biochemical's 8.2 billion yuan restructuring was approved; Zhao Shuanglian stepped down as chairman of COFCO Group; in 2016, COFCO Group reversed its performance decline. On July 17, COFCO Biochemical announced that SASAC had approved the restructuring plan, and the anti-monopoly review cleared the deal.

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COFCO Biochemical's 8.2 billion yuan restructuring was approved; Zhao Shuanglian stepped down as chairman of COFCO Group; in 2016, COFCO Group reversed its performance decline.
On July 17 at noon, COFCO Biochemical announced that the State-owned Assets Supervision and Administration Commission of the State Council (SASAC) had approved in principle the listed company's asset restructuring plan (acquiring 100% equity of three companies under COFCO for 8.2 billion yuan). At the same time, the Anti-monopoly Bureau of the State Administration for Market Regulation decided not to prohibit the restructuring, allowing the concentration to be implemented from that day forward. Thus, a major obstacle was removed for COFCO Biochemical's 8.2 billion yuan restructuring.
COFCO Biochemical is the largest corn deep-processing enterprise in China and one of the 18 specialized platform companies under COFCO Group, also known as one of the "Eighteen Arhats." Amid the restructuring of COFCO Biochemical, COFCO Group announced on July 9 that Zhao Shuanglian, who had been driving integration and reform, stepped down as chairman, and Lu Jun, former chairman of Sinograin, took over, marking the second leadership change in two years for this world-class grain and oil giant.
During Zhao Shuanglian's tenure as chairman of over two years, COFCO Group's previous aggressive expansion slowed down, with business integration, mixed-ownership reform and listing, and divestiture of loss-making assets becoming key themes. The Beijing News reviewed COFCO Group's issuance documents on chinamoney.com.cn and found that COFCO Group's operating profit margin in 2016 reversed the previous decline, with significant improvement in efficiency, but its debt scale remained huge and needs to be resolved in the future.
Leadership change during restructuring
On July 17, COFCO Biochemical announced that SASAC had approved in principle the listed company's asset restructuring plan.
According to the major asset restructuring plan of COFCO Biochemical, the company plans to issue shares to acquire 100% equity of three companies under COFCO Group: Biochemical Energy, Biochemistry, and Huali Investment, with a transaction price of 8.285 billion yuan.
The restructuring plan shows that after the transaction, a specialized company integrating the core businesses of COFCO Biochemical and the target companies, with integrated domestic and overseas operations, will become a pillar among the 18 specialized companies, implementing the central government's development policy for SOE reform of "strengthening, optimizing, and expanding" and "strengthening capital management," truly achieving asset specialization, operational specialization, and management specialization, with focused business, expanded scale, and optimized profitability.
Just as COFCO Biochemical was becoming one of the group's "Eighteen Arhats," Zhao Shuanglian, the head of COFCO Group known for reform and integration, stepped down.
On July 9, COFCO Group held a meeting for management above the middle level. Gao Xuanmin, Vice Minister of the Organization Department of the CPC Central Committee, announced the central government's decision on the adjustment of COFCO Group's main leaders: Comrade Lu Jun was appointed Chairman and Party Secretary of COFCO Group, and Comrade Zhao Shuanglian was relieved of his duties as Chairman and Party Secretary of COFCO Group and retired.
Zhao Shuanglian, born in April 1957, became chairman of COFCO Group in January 2016. His predecessor was Ning Gaoning, who was famous in the domestic business community and known as the "Red Morgan."
Public information shows that under Ning Gaoning's leadership, COFCO Group led more than 50 mergers and acquisitions, with assets growing from 59.8 billion yuan to the current 71.9 billion US dollars, ranking among the top three global grain enterprises. During Zhao Shuanglian's tenure, COFCO Group's reform was more notable.
In July 2016, when China National Cotton Group (CNCG) and COFCO Group launched a strategic restructuring, the reform pilot plan for COFCO as a state-owned capital investment company was announced. Zhao Shuanglian said at the time that according to the principle of "small headquarters, large industry," a three-tier structure would be formed: "Group headquarters capital layer - specialized company asset layer - production unit execution layer," with clear positioning and responsibilities; streamline and strengthen the body, solidify specialized companies (platforms), and achieve the transformation of the group headquarters to capital management.
At the end of 2017, COFCO Group announced that the number of staff in the headquarters' functional departments was reduced from 610 to 216, a decrease of 65%; the number of staff in specialized company headquarters was reduced from 1,988 to 1,171, a decrease of 41%.
Now, two years have passed. In an article in March this year, SASAC's "State-owned Assets Report" reviewed the progress of COFCO's reform over the past two years, noting that in the past two years, six specialized companies under COFCO Group had raised 27 billion yuan through equity operations such as mixed-ownership reform, employee stock ownership, listing, and fund establishment. Fourteen specialized companies had completed mixed-ownership reform or achieved equity diversification, and feed, wine, grain, and textile would complete mixed-ownership reform by the end of 2018.
Reform's "retreat and advance"
In addition to reform and industrial integration, COFCO Group's series of asset sales also attracted external attention.
According to chinamoney.com.cn, from 2015 to 2017, COFCO Group's investment income reached 7.049 billion yuan, 3.589 billion yuan, and 6.38 billion yuan, respectively. In 2017, investment income increased by 2.792 billion yuan year-on-year, mainly due to a 1.506 billion yuan increase in investment income from disposal of long-term equity investments, including 1.679 billion yuan from disposal of some cola bottling businesses and related investments, and approximately 352 million yuan from disposal of Nanjing and Suzhou Gloria Plaza Hotels.
One major "battlefield" for COFCO Group's sale of loss-making assets was the Beijing Equity Exchange. The Beijing News learned from COFCO Group that in 2017, the group listed 52 projects for transfer on the equity exchange, of which 38 were concluded, with a total appraised value of 18.05 billion yuan and a transaction amount of 23.75 billion yuan, an increase of 5.7 billion yuan over the appraised value, with an appreciation rate of 31.6%.
On July 16 this year, the Beijing Equity Exchange updated information that COFCO Group was listing for transfer 50% equity of Yongji COFCO Dabao Food Industry Co., Ltd. and 17.802197 million yuan in claims, with a minimum transfer price of 16.0219783 million yuan. The company's operating revenue was zero, but net profit was in loss, and owner's equity was only -28.0895 million yuan.
There are voices that COFCO Group's series of asset sales indicate that it ended its previous aggressive expansion in the Zhao Shuanglian era. However, this statement is not accurate. In fact, the restructuring of COFCO and CNCG shows that COFCO Group is still expanding in its main business. On July 18, 2016, CNCG and COFCO Group launched a strategic restructuring, with CNCG fully merged into COFCO as a wholly-owned subsidiary, which is another key measure for COFCO to integrate national grain and oil industry resources.
Lu Jun appointed Chairman of COFCO Group
After incorporating CNCG Grain and Oil and CNCG Oils, COFCO Group's main grain and oil business is expected to further expand.
Public information shows that CNCG and COFCO are both in the agricultural and grain industry, with their grain and oil businesses ranking first and third in domestic market size, respectively. After the restructuring, COFCO's domestic oil processing capacity will reach 24 million tons, with an overall market share of 18%, becoming the largest in China and ranking among the top in global oil processing capacity. The restructured cotton business chain will account for nearly 10% of the global market share.
Currently, COFCO is conducting continuous industrial integration of CNCG. In July this year, CNCG announced that to promote internal resource integration within COFCO Group, with COFCO Group's approval, CNCG plans to transfer its holdings in CNCG Grain and Oil Import and Export Co., Ltd. and CNCG Oils Co., Ltd. to COFCO Group or its subsidiaries through free transfer or agreement transfer, involving assets of over 20 billion yuan.
Industry insiders say that COFCO Group's expansion and optimization are not contradictory.
Zhou Lisha, deputy researcher at the SASAC Research Center, said that while improving the entire industry chain, COFCO Group is building industrial platforms and adjusting its management and control model. This is a holistic reform effort, and the purpose of both is to improve efficiency. COFCO Group's focus on profitability aligns with the current direction of SOE reform.
Over 380 billion yuan in liabilities to be resolved
Through reform measures and the "advance and retreat" of industrial layout, Zhao Shuanglian left new chairman Lu Jun a COFCO that had stopped declining and started recovering.
According to COFCO Group's financial data obtained by the Beijing News from chinamoney.com.cn, from 2013 to 2015, COFCO Group's gross profit margin for main business was 12.52%, 9.27%, and 7.13%, respectively, showing an overall downward trend, mainly due to the increasing proportion of low-profit grain, oil, sugar and other agricultural product trading, processing, futures, logistics, and related businesses. From 2015 to 2017, COFCO Group's gross profit margin for main business steadily increased, reaching 9.83% in 2017, up 1.20 percentage points year-on-year.
From the perspective of operating profit margin, COFCO Group reversed its previous decline after 2016. In 2013, COFCO Group's operating profit margin was 11.35%, declining to 8.24% and 6.18% in 2014 and 2015, then rebounding to 7.36% in 2016, rising to 8.91% in 2017, and 9.67% in the first quarter of this year.
Lianhe Credit Rating's latest rating report on COFCO Group in June 2018 pointed out that since 2016, COFCO Group has launched a new round of large-scale, deep, and comprehensive asset restructuring and structural adjustment oriented towards improving specialization. By sorting out business logic and designing and integrating 18 specialized companies (platforms), it has solved problems such as the separation of core business production, procurement, sales, and upstream and downstream, connected production, supply, and sales links, integrated resources, and improved comprehensive competitiveness and main business profitability.
Although profitability has improved, COFCO's other major financial indicator, debt scale, continued its previous expansion trend.
As of the end of 2017, COFCO Group's total liabilities were 386.101 billion yuan, up 8.02% year-on-year. Lianhe Credit Rating's latest rating report in June 2018 pointed out that in recent years, the company's interest-bearing debt scale has increased slightly, with a high proportion of short-term debt and a heavy overall debt burden.
As of the end of 2017, COFCO Group's short-term borrowings increased by 30.07% year-on-year, mainly due to stricter financial regulation in 2017, tightened bond liquidity, and significantly higher interest rates, leading the company to replace maturing bonds with bank loans.
Regarding the development direction of COFCO after the end of the Zhao Shuanglian era, Zhou Lisha said that both personal style and corporate development should be considered in the historical context. SASAC began promoting the transformation of state-owned asset supervision methods in 2013, including the 18 authorizations to COFCO. From a research perspective, COFCO's reform is the current trend and direction. The decisions made by COFCO, such as headquarters focusing on capital management and adjusting the management and control model, are all driven by the deepening SOE reform background and should be carried forward consistently and deeply.
The reporter noted that Lu Jun has taken over important work from Zhao Shuanglian multiple times. In 2013, Zhao Shuanglian, then general manager of Sinograin, was promoted to chairman, and Lu Jun was transferred to the position of general manager of Sinograin. In January 2016, Zhao Shuanglian was transferred to head COFCO, and Lu Jun subsequently took over as chairman of Sinograin. Now taking over as chairman of COFCO Group, this is the third time Lu Jun has "taken the baton" from Zhao Shuanglian.
Source: Beijing News
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