Since the introduction of the new "National Nine Articles", the China Securities Regulatory Commission has made clear provisions on the dividends of listed companies, and enterprises that make more money and do not meet the dividend standards will be directly dealt with by ST, which is definitely a crit for some "iron rooster" listed companies. Over the years, Fangda Carbon, which has become a graphene leader with the rise in the price of graphite electrodes, is one of them.
Following Fangda Special Steel, another "Fangda series" listed company adjusted its dividend plan.
On May 13, Fangda Carbon announced that it planned to distribute cash dividends of 0.032 yuan (tax included) per share to shareholders based on the total share capital deducted from the number of shares in the company's repurchase account on the day determined by the announcement on the implementation of equity distribution in the first quarter of this year. Based on the current share capital, a total of 127 million yuan (tax included) was distributed in cash dividends, accounting for 74.29% of the company's net profit attributable to the parent company in the first quarter. At the same time, Fangda Carbon also said that the total cash dividend distributed this year is planned to exceed 200 million yuan.
However, on May 11, Fangda Carbon did not plan to pay dividends, but planned to purchase wealth management products with its own funds of no more than 4 billion yuan, so it was criticized by most investors. As of the close of trading on May 14, Fangda Carbon's share price fell 0.39% to 5.17 yuan per share, with a total market value of 20.8 billion yuan.
Emergency dividends after large-scale financial management
The dividend plan came very suddenly. In the 2023 annual report disclosed as early as April 2, Fangda Carbon said that the company plans not to pay cash dividends, give bonus shares, or convert capital reserve into share capital in 2023. 2023 would have been the third year for Fangda Carbon to pay no dividends.
According to Fangda Carbon's response, the reason for the non-dividend in 2023 is: during the reporting period, the company used its own funds of 280 million yuan to implement share repurchase, and the repurchase amount was regarded as cash dividends, which calculated that the company's cash dividend in 2023 accounted for 67.27% of the company's net profit attributable to the parent company in the consolidated statement of 2023. The company's undistributed profits are accumulated and rolled over to the next year to meet the company's share repurchase, daily operation and other needs, and provide a reliable guarantee for the smooth implementation of the company's future development strategy.
However, with the disclosure of its huge financial plan, this reason is difficult to convince the market. On May 11, Fangda Carbon announced that the company and its holding subsidiaries plan to use their own funds to purchase financial products with high security and good liquidity. Within 12 months from the date of approval by the general meeting of shareholders, the amount of wealth management products purchased will not exceed 4 billion yuan.
The above news quickly attracted the attention of investors, and the hot topic mainly focused on the fact that although Fangda Carbon has been profitable for three consecutive years and has sufficient book funds, it has never had a dividend plan, but has purchased wealth management products in large quantities. As of December 31, 2023, the company's monetary funds were 6.191 billion yuan, a year-on-year increase of 96.42%, mainly due to the increase in investment funds received during the reporting period.
On May 13, Fangda Carbon announced the dividend plan, and the company intends to distribute a cash dividend of 0.032 yuan (tax included) per share to shareholders based on the total share capital determined by the announcement on the implementation of equity distribution in the first quarter of 2024 and the number of shares in the company's repurchase account on the day of the deduction. As of March 31, 2024, the company's total share capital was 4.026 billion shares, based on deducting the 49.5774 million shares held in the repurchase special securities account on the same day, and a total cash dividend of 127 million yuan (tax included) was distributed, accounting for 74.29% of the company's net profit attributable to the parent company in the first quarter of 2024. In the first quarter of 2024, no bonus shares will be given, and no capital reserve will be converted into share capital.
In addition, under the premise that the current profit and accumulated undistributed profit are positive, and the company's cash flow can meet the needs of normal operation and sustainable development, Fangda Carbon plans to distribute a total of more than 200 million yuan in cash dividends to all shareholders this year.
It is worth noting that Fangda Special Steel, which also belongs to Fangda Group, has also changed its dividend to respond to regulatory inquiries. On March 29, the company was questioned by the Shanghai Stock Exchange, requiring the company to make supplementary disclosures on issues such as non-dividends in the 2023 profit distribution plan. Subsequently, Fangda Special Steel adjusted the dividend plan, and the total amount of cash dividends proposed was about 233 million yuan.
Regarding why listed companies suddenly chose to pay dividends, senior financial commentator Pi Haizhou said in an interview with the reporter of "International Financial News" that this is mainly in response to the dividend policy. On April 30, the Shanghai Stock Exchange officially issued 9 supporting business rules, including the "Rules for the Review of Stock Issuance and Listing". It is mentioned that if the net profit of the most recent fiscal year is positive and the undistributed profit at the end of the parent company's statement year is positive, the total cumulative cash dividends of the last three fiscal years are less than 30% of the average annual net profit of the last three fiscal years, and the cumulative cash dividends of the last three fiscal years are less than 50 million yuan, and other risk warnings (ST) will be implemented.
The new "National Nine Articles" also clearly point out that the supervision of cash dividends of listed companies will be strengthened. Specifically, for companies that have not paid dividends for many years or have a low dividend ratio, major shareholders will be restricted from reducing their holdings and risk warnings will be implemented. Increase incentives for high-quality companies that pay dividends, and take multiple measures to promote the increase in dividend yields. Enhance the stability, sustainability and predictability of dividends, and promote multiple dividends a year, pre-dividends, and dividends before the Spring Festival.
It is worth noting that the repurchase cancellation may become another major measure for listed companies to respond to the dividend policy. Guo Shiliang, a financial commentator and an expert at the Whale Platform Think Tank, said in an interview with the International Financial News that under the guidance of the policy, since the repurchase cancellation is equivalent to cash dividends and can avoid the dividend tax, the repurchase and cancellation of listed companies has increased since the beginning of this year. In addition, the value of shares can be increased through share repurchase and cancellation, so it will be more friendly to shareholders for listed companies to implement large-scale repurchase and cancellation.
The main business is not good to invest in "self-help"
According to the information on the official website, Fangda Carbon was established in 1999 and later completed the listing of Hailong Technology through backdoor. As a leading enterprise of graphite electrodes, the company is mainly engaged in the development, production and sales of graphite electrodes, bulk carbon bricks, isostatic graphite, carbon/graphite materials for nuclear power, graphene materials, carbon/carbon composite materials, etc. Up to now, the company has five carbon product production bases, two graphite raw material R&D and production bases, three new material R&D and production bases, etc., and has developed into the world's leading high-quality carbon products production and supply base, nuclear carbon material research and production base.
However, due to the dual impact of fluctuations in upstream raw material prices and slowing demand in the downstream steel industry, the company's main performance is declining. According to the financial report data, from 2019 to 2023, the company will achieve operating income of 6.751 billion yuan, 3.539 billion yuan, 4.652 billion yuan, 5.32 billion yuan, and 5.132 billion yuan respectively; The net profit attributable to the parent company was 2.016 billion yuan, 547 million yuan, 1.085 billion yuan, 840 million yuan and 416 million yuan.
Especially in 2023, on the basis of a year-on-year decline of 3.54% in revenue, the company's net profit attributable to the parent company will drop by more than half; The gross profit margin of sales also fell by 6.8% year-on-year to 19.65%, hitting a new low in nearly a decade. In the first quarter of this year, Fangda Carbon's performance continued to decline, with the company achieving operating income of 1.388 billion yuan, a year-on-year increase of 3.15%, and net profit attributable to the parent company of 171 million yuan, a year-on-year decrease of 22.65%.
Behind this is the epitome of the general decline in the performance of the industry. In March 2024, the official website of the China Carbon Industry Association released the "2023 Economic Indicators of Member Enterprises in China's Carbon Industry". According to the statistics of the completion of economic indicators, in terms of sales revenue, the sales revenue of the carbon industry reached 38.964 billion yuan, a year-on-year decrease of 11.14%; The total profit was 1.722 billion yuan, a year-on-year decrease of 54.06%.
In the context of the continued weakness of the main business, Fangda Carbon also opened the "investment business". According to public information, from 2019 to 2021, Fangda Carbon plans to purchase more than 18 billion yuan of idle funds for its own use in wealth management products. In 2023, Fangda Carbon also plans to use no more than 3 billion yuan of its own funds to purchase wealth management products, and no more than 2 billion yuan of its own funds for securities investment.
In terms of investment income, Fangda Carbon will achieve a total of 152 million yuan in 2023, of which the investment income of trading financial assets during the holding period will be 14.53 million yuan. In addition, the company held financial assets measured at fair value of 1.297 billion yuan, stocks, private equity funds and other amounts of 587 million yuan, 309 million yuan and 401 million yuan respectively.
Regarding whether it is reasonable for listed companies to participate in wealth management products on a large scale, Guo Shiliang said that this is conducive to improving capital liquidity, but if there is a risk of redemption of wealth management products or default, it will have an impact on listed companies. The size of the impact depends on the size and proportion of financial participation.
In addition to the main business, keen investment is a major commonality of "Fangda series" listed companies. Taking Fangda Special Steel, which also belongs to Fangda Group, as an example, from 2019 to 2023, Fangda Special Steel plans to use its own idle funds with a total amount of no more than 15 billion yuan to purchase wealth management products.
Not long ago, Fangda Special Steel's wealth management product investment suffered a large loss. On April 8, Fangda Special Steel announced that the net value loss of trust products was 120 million yuan (unaudited), which is expected to have a greater impact on the company's attributable net profit in the first quarter of 2024. In the latest financial report, Fangda Special Steel achieved a net profit of 93.415 million yuan in the first quarter of this year, a year-on-year decrease of 27.95%.
Pi Haizhou analyzed that there are two reasons why listed companies are keen on investment and financial management: one is that the main business is not good, and the other is that it is difficult to hold accountable for investment losses. Although investment and wealth management are determined by listed companies independently, it is necessary to regulate them. In particular, once a large amount of funds are invested in financial management, it will not only affect the continued development of the main business, but also aggravate the predicament of the listed company once it faces investment losses.
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