Regulatory pressure on the "iron rooster" to pluck the feathers, the book balance of 6 billion yuan but two years of "zero dividends", Fangda Special Steel was questioned Performance dividend perspective mirror

Due to the "zero dividend" for two consecutive years in 2022 and 2023, on March 29, Fangda Special Steel (600507. SH) received an inquiry from the Shanghai Stock Exchange (hereinafter referred to as the "Shanghai Stock Exchange"), requiring the company to make supplementary disclosures on issues such as non-dividends in the 2023 profit distribution plan.

On the evening of April 2, Fangda Special Steel announced that the company's controlling shareholder, Jiangxi Iron and Steel Group Co., Ltd., proposed that the company (hereinafter referred to as "Fangda Steel") increase the profit distribution ratio in 2023 and propose to distribute a cash dividend of 0.1 yuan per share to all shareholders.

On the reason for adjusting the dividend plan, on April 3, Fangda Special Steel explained to the reporter of the China Times: "In order to enhance the investment value of listed companies, enhance investors' sense of gain, and promote the high-quality development of listed companies, the controlling shareholder proposed to the company to increase the dividend ratio." ”

Fangda Special Steel also pointed out that the supply and demand pressure of the steel industry in 2023 will still be very obvious, and the overall supply will be stronger than the demand. Although the cost pressure on the raw material side has eased, it is still relatively high, and the cost decline is not as large as the decline in downstream steel prices. In this regard, the company will take multiple measures to boost performance in the future.

Fangda Special Steel adjusts the "zero dividend" plan

On March 16, Fangda Special Steel announced that after the resolution of the board of directors, the company intends not to carry out cash dividends, stock dividend distribution, and capital reserve conversion to share capital in 2023, which is blamed on "intensified competition in the industry" and "seeking opportunities for mergers and acquisitions".

In 2024, the international and domestic situation faced by the steel industry is still complex and severe, and the domestic real estate industry is still in a downturn, which will drag down the demand for steel, the supply of steel capacity is still prominent, and the competition in the industry will intensify. At the same time, in the context of carbon peak and carbon neutrality, energy and environmental constraints are tighter, which puts forward higher requirements for the company's environmental protection standards, energy conservation and emission reduction.

Fangda Special Steel said that according to the current situation of the industry, combined with the company's profitability in 2023 and future capital needs, the company intends not to distribute profits in 2023, and the retained undistributed profits will be used for the company's environmental protection, technological transformation and other projects according to the company's development strategy and annual work plan.

However, on March 29, Fangda Special Steel received an inquiry letter from the Shanghai Stock Exchange on issues such as "zero dividends". The Shanghai Stock Exchange pointed out that Fangda Special Steel will achieve a net profit attributable to shareholders of listed companies of 689 million yuan in 2023 and a net profit of 926 million yuan in 2022. As of the end of 2023, its undistributed profit was 2.122 billion yuan, and the balance of monetary funds reached 6.045 billion yuan.

Therefore, the Shanghai Stock Exchange requires Fangda Special Steel to supplement the reasons and reasonableness of not paying cash dividends for two consecutive years under the background of its high balance of monetary funds and many years of profitability in combination with the profitability and use of funds in the past two years, and whether there is a large amount of idle funds. In addition, it is also required to explain whether Fangda Special Steel facilitates the participation of small and medium-sized shareholders in the decision-making of cash dividends, as well as the measures to be taken to enhance the level of investor returns.

On the evening of April 2, Fangda Special Steel announced that the company's controlling shareholder, Jiangxi West Iron and Steel Group Co., Ltd., proposed that the company increase the profit distribution ratio in 2023 and propose to distribute cash dividends of 0.1 yuan per share to all shareholders. The reporter saw that Fangda Special Steel has a total share capital of 2.331 billion yuan, and if the dividend is implemented according to the above plan, the total cash dividend is about 233 million yuan.

On April 3, Fangda Special Steel told reporters that the reason why the company adjusted the "zero dividend" plan was "in order to enhance the investment value of listed companies, enhance investors' sense of gain, and promote the high-quality development of listed companies, the controlling shareholder proposed to the company to increase the dividend ratio".

It has paid generous dividends for many years

Fangda Special Steel is a core listed steel enterprise under Liaoning Fangda Group Industrial Co., Ltd. (hereinafter referred to as "Fangda Group"). At present, Jiangxi Xida Iron and Steel Group Co., Ltd. (hereinafter referred to as "Fangda Iron and Steel") is the controlling shareholder of Fangda Special Steel, which directly holds 31.18% of the equity of the listed company, and holds 7.54% through its wholly-owned subsidiary, Jiangxi Automobile Leaf Spring Co., Ltd., with a total shareholding ratio of 38.72%; Fang Wei, the founder of Fangda Department, is the actual controller of Fangda Special Steel.

According to the announcement, the company's main business is the processing of metallurgical raw materials, ferrous metal smelting and its rolling processing products and their by-products, the main products include rebar, excellent wire, spring flat steel, automotive leaf springs, iron powder, etc., the products are mainly used in construction, automobile manufacturing and other industries.

According to Wind statistics, Fangda Special Steel has implemented dividends 14 times since its listing in 2003, with a cumulative dividend amount of 12.6 billion yuan and a cumulative profit of 17.7 billion yuan. Among them, in 2012, Fangda Special Steel achieved a net profit of 523 million yuan attributable to the parent company, implemented cash dividends of 1.301 billion yuan, and a dividend payment ratio of nearly 250%, while in 2021, the company distributed cash dividends of 11.10 yuan (tax included) to all shareholders for every 10 shares, with a total cash dividend of 2.393 billion yuan (tax included), accounting for 87.60% of the net profit attributable to the parent company for that year.

As for the "zero dividend" plan proposed twice in 2022 and 2023, Fangda Special Steel's explanations are factors such as high costs, weakening demand, and declining profits.

Judging from the performance of the past two years, Fangda Special Steel is indeed facing the problem of declining profits: in 2022, Fangda Special Steel's net profit attributable to shareholders of listed companies will be 926 million yuan, a year-on-year decrease of 66.1%, and in 2023, the company's consolidated statement will achieve a net profit attributable to shareholders of listed companies of 689 million yuan, a year-on-year decrease of 35.16%.

Behind Fangda Special Steel's choice of "zero dividends", the performance of many listed steel companies has been seriously squeezed in recent years. According to the data released by the China Iron and Steel Association, in 2023, the total profit of key member iron and steel enterprises will be 85.5 billion yuan, a year-on-year decrease of 12.47%, and the average sales profit margin will be 1.32%, a year-on-year decrease of 0.17 percentage points.

"In 2023, the supply and demand pressure of the steel industry will still be very obvious, and the overall supply will be stronger than the demand. Although the cost pressure on the raw material side has eased, it is still relatively high, and the cost decline is not as large as the decline in downstream steel prices. Fangda Special Steel stressed to the "China Times" reporter: "The company actively responds to various difficulties and challenges, and maintains a healthy and stable development trend, although the company's net profit in 2023 will decline slightly year-on-year, but the profit level and profitability of tons of steel are still in the first phalanx of listed companies in the industry." ”

In the face of the existing pressure on the industry and itself, Fangda Special Steel said that the company will take a variety of measures to boost its performance in the future, such as empowering the company's transformation with digital technology, supporting refined production and operation and cost control capabilities, and increasing the company's product transformation and upgrading efforts in combination with market demand and prospects, and developing high-tech and high-value-added products, including but not limited to the development of high-performance, high-quality and user-specific spring flat steel products around the development trend of automobile lightweight.

Strengthen the supervision of cash dividends

It is worth noting that in the capital market, there are quite a few listed companies with "iron roosters". According to incomplete statistics from the media, as of April 1, 1,119 A-share listed companies have disclosed their 2023 annual reports, and 993 listed companies have achieved profitability in 2023, of which 255 companies have disclosed that they will not distribute or increase, accounting for more than two percent.

Public information shows that many listed companies have abundant cash on their books and hold high undistributed profits, but they have not paid dividends for many years. For example, Hainan Airport, Chifeng Gold, Petrochemical Oil Services, Huadian Energy, etc. have not paid dividends for more than ten years, while Jinbei Automobile, Tonghua Jinma, and Guangsheng Nonferrous Metals have never paid cash dividends for more than 20-30 years.

However, in recent years, the regulator has repeatedly emphasized dividends, and in August 2023, the China Securities Regulatory Commission (CSRC) issued a shareholding restriction policy, which for the first time "linked" dividends to shareholding reductions. In December of the same year, the new regulations on cash dividends of listed companies were implemented, further improving the normalized dividend mechanism of listed companies and improving the level of investor returns.

On March 15 this year, the official website of the China Securities Regulatory Commission showed that the "Opinions on Strengthening the Supervision of Listed Companies (Trial)" policy document was formulated and promulgated, which pointed out that it is necessary to strengthen the supervision of cash dividends and enhance investor returns, including taking strong restraint measures on dividends, taking multiple measures to increase dividend yields, and promoting multiple dividends a year.

Recently, as the regulatory requirements for listed companies to increase the intensity of dividends, a number of companies that have been "zero dividends" for more than ten consecutive years have responded to dividends. For example, Chifeng Gold announced on March 30 that the company will distribute cash dividends of RMB 0.50 to all shareholders for every 10 shares based on a total share capital of 1,648,728,800 shares in 2023, with a total cash dividend of RMB 82,436,400.

Bai Wenxi, vice chairman of the China Enterprise Capital Alliance, pointed out to reporters that encouraging cash dividends is conducive to stabilizing investor confidence and cultivating investors' long-term investment philosophy on the one hand, and on the other hand, it will also help improve the dividend level of listed companies, enhance the attractiveness of the capital market, and promote the long-term healthy development of the market.

Editor-in-charge: Zhang Bei Editor-in-chief: Zhang Yuning