Tuyere financial reporter Zhao Chong
Recently, the high-level changes of Luxi Chemical Group Co., Ltd. have attracted widespread attention in the industry. Recently, Comrade Wang Ligang served as the deputy general manager and member of the party group of Sinochem Holdings Co., Ltd., and the new appointment was less than three months after Wang Ligang was elected as the chairman of the eighth board of directors of Luxi Chemical on February 7.
After the subsidiary's "10 dead and 1 injured" accident investigation report was released, it was alleged that it had major deficiencies in internal control over non-financial reporting, resulting in a 74% reduction in net profit last year and the suspension of more than 6.3 billion restructuring plans. At present, Luxi Chemical said that it will continue to promote the absorption and merger.
There are frequent changes at the top
On May 6, the website of Sinochem announced that Wang Ligang had been appointed as the deputy general manager and member of the party group of Sinochem, and the appointment and removal of relevant positions were handled in accordance with relevant laws and regulations.
It is worth noting that before taking up the new post of Sinochem, Wang Ligang served as the chairman, party secretary and general manager of Luxi Group on February 7, and the chairman of Luxi Chemical.
Luxi Group is a state-owned holding enterprise, approved by the China Securities Regulatory Commission in May 1998, listed on the Shenzhen Stock Exchange in August 1998, and joined Sinochem in 2020. Its main business includes new chemical materials, basic chemicals and other businesses.
The reporter noted that since the beginning of this year, the senior management of Luxi Chemical has experienced a series of rapid and intensive personnel adjustments:
On February 7, Luxi Chemical Group Co., Ltd. issued an announcement on the resignation of Zhang Jincheng, the former chairman of the company. On the same day, director Wang Ligang was elected as the chairman of the eighth board of directors of the company.
On March 11, Luxi issued an announcement again, announcing the resignation of Wang Fuxing, the company's former deputy general manager.
On March 14, Lu Xi quickly announced the new appointment of the deputy general manager: the board of directors agreed to appoint Mr. Zhang Lijun as the company's deputy general manager.
On April 29, Luxi Chemical announced that the board of directors agreed to remove Mr. Yang Benhua and Mr. Deng Shaoyun from the positions of deputy general managers after the company's management, and they are still working in the company after the adjustment.
It was alleged to have material deficiencies in internal control over non-financial reporting
On the evening of April 29, Luxi Chemical announced that after the company's 2023 internal control audit, Baker Tilly International Accounting Firm (Special General Partnership) (hereinafter referred to as Baker Tilly International) issued the "2023 Internal Control Audit Report of Luxi Chemical Group Co., Ltd.", believing that there were major deficiencies in the company's internal control related to non-financial reporting and safety production.
Image source: Company announcement
Baker Tilly's judgment stemmed from the accident that occurred on May 1 last year at a subsidiary of Luxi Chemical. According to the relevant announcement, on the morning of May 1, 2023, the hydrogen peroxide device of Liaocheng Luxi Hydrogen Peroxide New Material Technology Co., Ltd. (hereinafter referred to as the hydrogen peroxide company), a subsidiary of Luxi Chemical Company, exploded and caught fire, resulting in 10 deaths, 1 injury, and a direct economic loss of 54.4531 million yuan.
The reporter noted that according to the criteria for identifying internal control deficiencies in non-financial reporting of Luxi Chemical, "the amount of direct property losses exceeding 20 million yuan (inclusive), the death of more than 10 people or the serious injury of more than 20 people, and the negative impact on the company's regular reporting or corporate image" are major deficiencies in internal control over non-financial reporting.
Therefore, Baker Tilly International believes in the report that there are major deficiencies in Luxi Chemical's internal control related to production safety.
Previously, on the evening of April 21, Luxi Chemical announced that on April 19, 2024, the Shandong Provincial People's Government issued an approval on the "Investigation Report on the "5.1" Major Explosion and Fire Accident of Liaocheng Luxi Hydrogen Peroxide New Material Technology Co., Ltd.
According to the documents, the "5.1" major explosion and fire accident of hydrogen peroxide company is a major production safety liability accident caused by unclear identification of high-concentration hydrogen peroxide safety risks, poor control, illegal operation, and on-site personnel gathering.
Net profit decreased by 74% due to safety incidents, and the restructuring plan of more than 6.3 billion yuan was suspended
It is worth noting that as a wholly-owned subsidiary of Luxi Chemical, after a major accident occurred in Hydrogen Peroxide Company, Luxi Chemical's performance and capital operation in 2023 were also affected.
On the evening of April 29, Luxi Chemical released its 2023 annual report. During the reporting period, Luxi Chemical achieved operating income of 25.358 billion yuan, a year-on-year decrease of 16.47%; net profit attributable to shareholders of listed companies was 819 million yuan, a year-on-year decrease of 74.05%.
Image source: Company announcement
Luxi Chemical said that during the reporting period, affected by factors such as oil price fluctuations and intensified competition in the chemical product market, the downstream demand for the company's chemical products was poor, and the year-on-year decline in the price of some products was greater than the decline in the price of corresponding raw materials. In the third and fourth quarters, although the chemical product market has rebounded, and the prices of some major chemical products have rebounded and fluctuated, the price of products has decreased significantly year-on-year, resulting in a year-on-year decline in the company's operating performance.
In addition to the impact on last year's performance, the explosion accident also affected Luxi Chemical's plan to absorb and merge its controlling shareholder, Luxi Group, to achieve an overall listing.
Luxi Chemical is an important subsidiary of Sinochem. In order to give full play to the utility of the capital operation platform of the listed company, Luxi Chemical announced in April 2022 that it intends to issue shares to all shareholders of Luxi Group to implement the absorption and merger of Luxi Group. After the completion of the merger, Luxi Group will cancel its legal personality.
In November 2022, Luxi Chemical disclosed a specific absorption merger plan, which intends to implement an absorption merger of Luxi Group by issuing shares to all shareholders of Luxi Group (Sinochem Investment, Sinochem Liaocheng, Caixin Holdings and Aggregate Investment). After the completion of this transaction, Luxi Chemical is the surviving party, which will inherit and undertake all the assets, liabilities, personnel, business, contracts and all other rights and obligations of Luxi Group. After negotiation between all parties, the final transaction price of 100% equity of Luxi Group is 6.395 billion yuan.
However, while the restructuring was proceeding in a step-by-step manner, on May 1, 2023, an explosion occurred at the hydrogen peroxide company.
Since then, the restructuring has stalled. Until the evening of April 16, Luxi Chemical disclosed that the approval of the China Securities Regulatory Commission expired and expired on the company's issuance of shares to absorb and merge the controlling shareholder Luxi Group.
Luxi Chemical said that the merger of absorption has been shelved, and the company's production and operation are normal, and the expiration of the approval will not have a significant impact on the company's production and business activities. Once the results of the accident investigation are clear and the conditions for restructuring are met, the company will continue to move forward with the merger by absorption.
In response to the frequent changes in the company's senior management and the decline in profits, the reporter called Luxi Chemical many times, but as of press time, the other party did not respond.