(Yicai) Jan. 16 -- The chairman of Oriental Yuhong Waterproof Technology plans to sell as much as 2 percent of his stake in the coatings supplier and use the proceeds to compensate staff who have seen the value of their shares in the company tumbled by over 60 percent.

Li Weiguo will sell up to 50.37 million Oriental Yuhong shares in the next three months, the Beijing-based company said recently. The funds raised will be used to recompense employees who took part in its share incentive scheme.

The sale would raise about CNY894 million (USD125 million) based on today’s closing share price [SHE: 002271] of CNY17.74 (USD2.50). Li and persons acting in concert own about 23.1 percent of Oriental Yuhong.

Under the terms of the share ownership scheme, Li needs to compensate staff if the annual rate of return of their holding is less than 8 percent after the stock is liquidated.

Oriental Yuhong launched the program in March 2021, when the stock price was high. More than 1,400 employees joined, with the shares costing an average of CNY55.78 each to reach a total of CNY2.8 billion (USD389.8 million), some CNY1.4 billion of which was directly funded by workers. Based on today's closing price, scheme has lost more than CNY1.8 billion. 

The shares have sunk in the past two years due to a falloff in demand for waterproofing, Oriental Yuhong’s main business, amid the downturn in China’s property market. Net profit halved to CNY2.1 billion in 2022, while revenue fell 2 percent to CNY31.2 billion (USD4.4 billion), both down for the first time since the firm went public in 2008.

In addition, due to the longer repayment cycles of real estate customers, Oriental Yuhong also faces a higher risk of bad debt. As of Sept. 30, the company had accounts receivable of CNY15.1 billion, up 39 percent from a year ago and equal to 30 percent of its entire assets.

Editors: Dou Shicong, Emmi Laine