Zhejiang Private Giant Meets 36 Years Old "Second Generation" Female Leader | Chairman | Leader

On July 12th, Tongkun Group Co., Ltd., a domestic chemical fiber private giant located in Tongxiang, Zhejiang Province, known as the "world's largest production capacity of polyester filament", held its first extraordinary shareholder meeting of the year and reviewed and passed the proposal for the integrated project of Taikun Petrochemical Co., Ltd.'s North Canada Refining and Chemical Industry in Indonesia.

According to the previous announcement, the total investment of the project is 8.624 billion US dollars, equivalent to approximately 61.5 billion yuan, to extend the industrial chain and ensure the supply of raw materials.

On June 21st, founder Chen Shiliang stepped down as the chairman of the listed company and handed it over to his daughter Chen Lei, but he still served as the chairman of Tongkun Holdings Group, the controlling shareholder of Tongkun Group.

Left: Chen Shiliang, Right: Chen Lei Data Map

When "second-generation" Chen Lei took over, Tongkun Group was facing the problem of continuous decline in performance. Nowadays, industry competition is becoming increasingly fierce, and expanding production has led to an oversupply crisis. However, Tongkun Group has chosen to invest heavily in the Indonesian market, planning to connect the entire industry chain to reduce costs and increase efficiency. Can such ambition be realized?

Tongkun Shares Bets on the Indonesian Market

On July 12th, Tongkun Corporation held its first extraordinary general meeting of shareholders this year to review and approve the proposal for the refining project in North Canada, Indonesia. The company's previous announcement showed that this project with a total investment of 8.624 billion US dollars is aimed at extending the industrial chain, ensuring raw material supply, and preventing oil price fluctuations from devouring profits.

This huge investment project that connects the entire industry chain was not completed by Tongkun alone. On June 27th, Tongkun Group teamed up with Xinfengming from Tongxiang and Shanghai Qinghong to launch an integrated refining and chemical project in North Canada, Indonesia.

The project plans to produce an annual output of 4.3 million tons of refined oil, 4.85 million tons of para xylene, as well as other products such as polyethylene and EVA. The construction period is 4 years, and after investment, the annual crude oil processing capacity will reach 16 million tons/year. As expected, the project is expected to have an average annual operating income of 10.44 billion US dollars and an average annual after tax profit of 1.328 billion US dollars after completion.

According to the agreement, the Indonesian project follows the joint venture plan, with three shareholders required to contribute $2.6 billion and borrow an additional $6 billion. After the equity penetration, Tongkun actually holds 45.9% of the project, accounting for the highest proportion. As the main investor, it must provide a capital of 1.2 billion US dollars, corresponding to a debt commitment of 2.75 billion US dollars, totaling approximately 28.5 billion RMB.

It is worth noting that Tongkun Group's net assets are only around 35 billion yuan. After this trip to Indonesia, Tongkun Group has almost invested all its assets. If the integrated layout is completed, its revenue and asset size will be incomparable.

According to the latest news, the predecessor of Tongkun Corporation, Tongxiang County Chemical Fiber Factory, was established in 1981. In 1990, the factory encountered difficulties and became the last enterprise in the scale and efficiency of the chemical fiber spinning industry in Zhejiang Province. In 1991, the local government issued an order to appoint Chen Shiliang, former deputy director of Fengming Chemical Fiber Factory, as the director of Tongxiang Chemical Fiber Factory. At that time, Tongxiang Chemical Fiber Factory, with total assets of less than 5 million yuan, was already insolvent for nearly 1 million yuan.

In 1992, Chen Shiliang and his management team streamlined their development ideas and "borrowed a ship to go out to sea", starting the market transformation from polypropylene to polyester. In 1995, the operating income of Tongkun jumped to the top of Tongxiang. In 1997, Tongkun rose against the trend during the Asian financial crisis and completed a series of scale expansions with low-cost advantages, with polyester filament production ranking first in China. In 1999, Tongkun completed the shareholding reform and officially changed its name to "Tongkun Group". In May 2011, Tongkun Co., Ltd. went public, marking a new stage in its development.

On the 2022 Hurun China Top 500 list, Tongkun Co., Ltd. ranked 397th, while Chen, with a net worth of 9.5 billion yuan, ranked 663rd on the Hurun list.

At present, the total assets of Tongkun Holding Group exceed 100 billion yuan, with over 80 holding enterprises and over 33000 employees. Its polyester filament production ranks first in the world. The group ranks 6th among the top 500 Chinese petroleum and chemical enterprises, and 29th among the top 500 Zhejiang merchants in China. An insider from Tongkun told reporters that Tongkun Group's assets account for 90% of the total assets of Tongkun Holding Group.

Chen Lei's Thirteen Years of Training

According to previous reports by Chao News, Chen Lei is the daughter of Chen Shiliang, born in May 1987 with a master's degree. She graduated from Imperial College London in 2010 with a master's degree in Risk Management and Financial Engineering. She started working at Tongkun Group in November 2010, starting as the Secretary of the Chairman. She worked in warehouses, workshops, and finance departments before going to the Hong Kong branch for training. In 2020, she returned to the Group headquarters and served as the Assistant to the Chairman and Vice Chairman until June 2023 when she became the Chairman and President.

Data chart

Chen Lei grew up in a family of Zhejiang merchants who were brave and hardworking, and was deeply influenced. She had long been familiar with the family business.

According to the "Tongxiang Release" report, Chen Lei's father Chen Shiliang has been a busy entrepreneur since she started recording events. "When I was a child, my father was really busy. When encountering workshop technicians, I often had to be busy until three or four in the morning before coming back. I couldn't sleep for two or three hours, quickly grabbed breakfast, and then went out to work."

She visited the spinning workshop for the first time, and the temperature was very high. Although everyone was sweating profusely, they couldn't hear any complaints; Attending the annual meeting of the group with her father is a beautiful blueprint for future development, which is inspiring... Chen Lei is very familiar with the experiences of her father's generation.

Starting from his student days, his father would intentionally or unintentionally discuss the development of enterprises with Chen Lei. "However, even so, my father never extinguished my other possibilities." She admitted that at the beginning of studying abroad, she wanted to learn architectural design. However, after carefully considering future plans and listening to family opinions, she still chose a management related major.

After graduating from university, Chen Lei, who had successfully received an offer in the UK, decided to return to her home country. "Actually, I talked to my father about whether or not to come back to take over. My father was very open-minded and respected my ideas. However, Chen Lei, who had witnessed the hardships of her father's entrepreneurship since childhood, knew that compared to the mission of revitalizing the industry, her hobbies could only be put aside." This is a choice with no turning back. Since I have come back, I will persist until the end, "she said.

Taking off the glamorous shell of the second generation, Chen Lei stumbled upwards from the grassroots. Her first position at the Tongkun headquarters was as a warehouse manager, starting with finished products and then hardware. Every day, she faced data such as inbound and outbound operations. After two months, she could easily answer questions about which product had high sales and which product had large inventory.

After the changes in multiple positions including warehouse, workshop, finance, and Hong Kong branch, Chen Lei has a clear understanding of the entire process of enterprise operation. After 10 years of training on the front line of business, she returned to Tongxiang in 2020 and joined the headquarters of Tongkun Group. The reporter noticed that the father was well prepared to train his daughter to take over, and in recent years, Chen Lei has taken on all the external affairs of the group, big and small.

Chen Lei was officially appointed as Chairman and President in June this year, and her husband Xu Qipeng was also promoted to Vice President of Tongkun on May 31 of this year.

Xu is one year older than Chen Lei and graduated with a bachelor's degree in Marketing from the University of Newcastle in the UK. He has served as the head of the second procurement and supply department of Tongkun Group and the general manager of Zhejiang Hengsheng Chemical Fiber under Tongkun Group. Starting from July 2021, he has been serving as the assistant to the president of Tongkun Group.

At the same time, the new board of directors of Tongkun Group has become more youthful, with multiple directors born after 1970, including Chen Hui and Shen Qichao, both born in the 1990s.

Faced with a severe business situation

Chen Lei took over as the Chairman and President of Tongkun Group, facing a severe business situation.

On the evening of July 14th, Tongkun Group announced that it is expected that the net profit attributable to shareholders of the listed company in the first half of 2023 will be RMB 90-13 million, a year-on-year decrease of 94.35% -96.09%; The net profit after deduction was RMB 2-42 million, a year-on-year decrease of 98.14% -99.91%.

In response to the decline in performance, Tongkun Shares stated that during the period, due to the weak overall macroeconomic recovery trend, the company's main products, polyester filament and PTA processing, showed a significant decline compared to the same period last year; There has been a significant increase in newly added production capacity compared to the same period last year, resulting in higher initial start-up and production costs; In the first half of 2023, Zhejiang Petrochemical Co., Ltd., in which the company participated, suffered losses due to a slow recovery in downstream demand, narrowing the price difference of its main products, and a decrease in gross profit margin. In addition, the overall profit amount of the company is relatively small, and non recurring gains and losses such as government subsidies and non current asset disposal have had a certain impact on the company's net profit.

In fact, due to the impact of crude oil prices, Tongkun's life has been difficult, and in the past two years, its business has taken a sharp turn for the worse.

In 2021, it is still making great progress, with a net profit of 7.3 billion yuan for the whole year, an increase of about 1.6 times.

Starting from July last year, Tongkun turned from profit to loss, earning only 130 million yuan for the whole year, a year-on-year decrease of 98.26%. Why is the performance decline so severe? Tongkun Group stated that its performance has generally declined due to the combination of high prices and weak downstream demand.

On July 12th, due to inaccurate disclosure and untimely correction of performance forecasts, Tongkun Shares and related responsible persons received a warning letter and recorded it in the integrity file of the securities and futures market.

According to a document recently released on the website of the Zhejiang Regulatory Bureau of the China Securities Regulatory Commission, on January 31, 2023, Tongkun Group Co., Ltd. disclosed the "2022 Annual Performance Reduction Announcement", which is expected to achieve a net profit attributable to shareholders of the listed company of RMB 300 million to RMB 420 million in 2022. However, on April 22, 2023, the company disclosed its 2022 Annual Report, which resulted in a net profit of 130 million yuan attributable to shareholders of the listed company. Inaccurate disclosure and untimely correction of performance forecast related information.

The Zhejiang Securities Regulatory Bureau believes that the above behavior violates Article 3 of the Measures for the Administration of Information Disclosure of Listed Companies. Chen Shiliang, the then chairman of the company, Xu Jinxiang, the then president, Zhou Jun, the then secretary of the board of directors, and Fei Miaoqi, the CFO, violated the provisions of Article 4 and Article 51 of the Measures for the Administration of Information Disclosure of Listed Companies and bear the main responsibility for the above-mentioned violations. The Zhejiang Securities Regulatory Bureau has decided to take supervision and management measures by issuing warning letters to Tongkun Shares, Chen Shiliang, Xu Jinxiang, Zhou Jun, and Fei Miaoqi respectively, and record them in the integrity archives of the securities and futures market.

Since last year, Tongkun Group's total liabilities have remained high, rising from 33.6 billion yuan in 2021 to 55.13 billion yuan in 2022. In the first quarter of this year, the total liabilities increased to 57.3 billion yuan, with an asset liability ratio of 62.4%.

In addition, in recent years, the net inflow of operating cash flows of Tongkun Group has continued to decrease. From 2019 to the first quarter of 2023, the net operating cash flow of Tongkun Co., Ltd. was 5.116 billion yuan, 3.347 billion yuan, 2.794 billion yuan, 1.073 billion yuan, and -2.293 billion yuan, respectively. From 2020 to 2022, the net operating cash flow decreased for three consecutive years.

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