(Yicai) Nov. 21 -- Chenming Paper Holdings is facing a severe financial crisis, with over CNY1.8 billion (USD248.5 million) in overdue debts and CNY30 billion (USD4.1 billion) in short-term liabilities, at a time when the firm is halting much production to mitigate losses resulting from falling demand and prices.

Chenming Paper, one of China's largest paper manufacturers, and its subsidiaries had an accumulated overdue debt principal and interest of CNY1.8 billion as of Nov. 18, the Weifang-based company said the following day.

That sent its shares [SHE: 000488] tumbling 9.9 percent in Shenzhen yesterday. They clawed back 3 percent today to close at CNY3.47 (48 US cents) apiece. The stock is down about 10 percent since the end of last year.

Chenming Paper only had about CNY10 billion of available cash and liquid assets at the end of September, with much of that tied up. Its total short-term borrowings and non-current liabilities due within one year had exceeded CNY32 billion.

The company’s debt crisis is linked to a deterioration in earnings. It reported a net loss of more than CNY800 million (USD110.4 million) for the three months ended Sept. 30, mainly due to falling demand and prices, while its cash flow shrank. 

In an effort to reduce losses, Chenming Paper has limited or suspended production at its bases in Shandong, Jiangxi, Jilin, and other provinces since the start of this month, involving nearly 72 percent of its output. It has also sold several assets since last year.

Chenming Paper fell into the red last year, losing CNY1.3 billion versus a net profit of CNY317 million in 2022 and CNY2.1 billion in 2021. Revenue sank to CNY26.6 billion from CNY32 billion and CNY33 billion, respectively. 

Editor: Martin Kadiev