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Longxing Chemical management resigns

David Shaw of Tire Industry Research called my attention to this article from China Times. The Chinese language article reports that seven key members of the Board of Directors at Longxing Chemical (Shahe, Hebei, China) have resigned per a notification to the Shenzhen Stock Exchange. Longxing Chemical is the third largest carbon black producer in China and a leading producer of precipitated silica.

According to the notice, the seven resignations are:

  1. Yu Jumei, General Manager and Senior Accountant

  2. Ma Baoliang, Deputy General Manager 

  3. Ms. Li Ying, Chief Financial Officer

  4. Liu Heshan, Board member

  5. Lixue Bo, General Manager

  6. Jiang Hao, Director 

  7. Zhou Wenjie, Vice Director and Supervisor

At a Board meeting on May 17, the following replacement appointments were made:

  1. Mr. Zhang Wenbin, General Manager and Chief Financial Officer

  2. Mr. Ren Weiliang, Executive Vice President (responsible for the company’s overall carbon black business)

  3. Mr. Qi Yong, Deputy General Manager

According to the article, there are three reasons that the management of Longxing Chemical decided to resign at this time:  

1. The company had planned financing and reorganization for three times in 2011 and 2015, respectively. However, all plans failed after all.

2. The company failed in the competition with the peer company (Jiangxi Black Cat Carbon Black Inc.,Ltd.). Longxing Chemical ranks No.3 in carbon black field, however Jiangxi Black Cat Carbon Black Inc.,Ltd. ranks No.1. The main reason for the failure is the higher cost of feedstock for Longxing Chemical compared to Black Cat. (Black Cat is back-integrated into coal tar distillation but Longxing is not.)

3. The price of carbon black continues to decline due to excess capacity. Now Longxing Chemical falls into losses. This situation destroys the confidence of the board. As a result, the board decided to resign before the situation becomes worse.

The company has called an EGM (Extraordinary General Meeting) for June 2 at 9:30 AM. Voting on the new board will be open on the web June 1 and June 2.

Related public filings (all Chinese language): 

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