China cement producer turns to profit with solution to defaults

JINAN - Shandong Shanshui Cement, one of China's largest cement producers, has defaulted on its debt, been witness to a vicious boardroom battle and finally turned its losses into profit.

The company, with more than 20,000 employees across various provinces, defaulted on multiple bonds after a fierce battle for control of the company last year, but solutions to the 4.6 billion yuan ($664 million) of defaulted debt are now in place, deputy chairman Mi Jingtian said Wednesday.

Mi, who is responsible for daily operations, said the company had "paid in full" all outstanding interest and regained a "normal working relationship" with commercial banks.

Shandong Shanshui Cement is the operating subsidiary of China Shanshui Cement, listed on the Hong Kong stock exchange. A Dec 5 disclosure said Shandong Shanshui had settled with China Merchants Bank in a dispute over 564 million yuan of loans.

Apart from being sued by commercial banks, Shandong Shanshui's defaults included a 2 billion yuan bond in November 2015 and a 1.8 billion yuan bond in January 2016.

Boardroom brawl

The defaults were the direct results of a protracted battle for control of Shandong Shanshui and China Shanshui.

Banks and financial institutions that the company had dealings with were alarmed by the uncertainty and the impact on business prospects. The fight led to chaos and sometimes violence, with neither side willing to surrender control. It got so bad that the local government sent in a team of officials to the company, which is not state-owned, to ensure order.

The new board is now in "total control" of all subsidiaries and putting them back to work, said Mi.

Big turnaround

China Shanshui Cement used to make profits of hundreds of millions yuan, but collapsed to a stunning 6.7 billion yuan loss in 2015, when boardroom troubles reached their climax and the cement market plunged.

Mi claimed that since then a lot has been done to lower business costs, including more effective sourcing of raw materials.

Cement prices have since risen in China, but at the same time, production has been slashed. In October, Shandong Shanshui hosted the meeting that saw northern China's biggest cement players sitting together to coordinate the cuts.

This year, Mi said, Shandong Shanshui has significantly outperformed last year and the company is operating "at a profit" again.