The Cost of Overcapacity: A Veteran Polyester Leader's Financial Crisis as an Industry Warning

A publicly listed company with a 46-year history and once hailed as a 'polyester leader' is now teetering on the brink of delisting. Sanfangxiang (*ST Sanfang) received a 'disclaimer of opinion' on its 2025 annual report and an 'adverse opinion' on internal controls, triggering dual delisting risk warnings. This is not just a single corporate crisis but a microcosm of the severe overcapacity and intensifying competition plaguing the polyester bottle-grade chip industry.

The Story Behind the Financial Data

The company's loss trajectory is alarming. From 2023 to 2025, Sanfangxiang recorded three consecutive years of losses, totaling 1.628 billion yuan. In 2025 alone, the loss reached 885 million yuan, nearly doubling year-on-year. This starkly contrasts with the initial expectations after the 2020 acquisition of Hailun Chemical for 7.35 billion yuan—a 'snake swallowing an elephant' deal that pivoted the company's main business from textile printing and dyeing to polyester bottle-grade chips and PTA. In the first two years post-acquisition, profits grew steadily, peaking at 818 million yuan in 2022. But the rapid deterioration of industry supply-demand dynamics soon dragged the company into a quagmire.

Debt risks are equally severe. As of the latest announcement, cumulative overdue debts guaranteed by the company for its subsidiaries reached 522 million yuan, accounting for 10.82% of the latest audited net assets. More concerning, accounts receivable from related parties stood at 3.561 billion yuan, with only 107 million yuan in bad debt provisions. Auditors explicitly stated they could not obtain sufficient audit evidence for the recoverability of these amounts. The controlling shareholder's shares are under judicial freeze, and potential disposal could lead to a change in actual control.

Root Causes of Industry Involution

Sanfangxiang's crisis stems from severe supply-demand imbalance in the polyester bottle-grade chip market. According to China Customs and industry public data, from 2023 to 2024, domestic capacity was released intensively, exceeding 20 million tons per year, while market demand was only 12 million tons. The sharp contradiction squeezed product spreads continuously. As the second-largest player, Sanfangxiang joined the capacity expansion race, only to find that increased output did not translate into profits.

A more fatal flaw is the company's narrow industrial chain layout, covering only the PTA-to-polyester chip segment while relying entirely on external purchases for the core raw material, PX. This lack of cost control capability means any upstream PX price hikes directly compress margins. In 2025, the company's trading business revenue plummeted 59.97% year-on-year, a clear sign of this fragility.

Policy Signals and Market Turnaround

In the second half of 2025, relevant national authorities held symposiums with leading PTA and bottle-grade chip enterprises to discuss industry operations and project progress. Against the backdrop of supply-demand mismatch and razor-thin margins, these meetings were widely interpreted as a move to prevent and resolve 'involutionary' competition. Policy intervention has brought a glimmer of hope.

In Q1 2026, Sanfangxiang achieved a net profit of 32.7409 million yuan, turning profitable year-on-year. This reflects initial effects of industry self-discipline and capacity adjustment, as well as external factors—the Strait of Hormuz blockade caused a significant rebound in polyester chain product prices and improved margins. However, the sustainability of this turnaround remains uncertain. On June 26, 2026, Lianhe Credit Rating downgraded Sanfangxiang's long-term credit rating to A- with a negative outlook, indicating market caution over the company's credit risk.

Practical Recommendations

For Buyers - Monitor the supply stability of Sanfangxiang and its affiliates, especially for long-term orders of polyester chips and PTA. Diversify sourcing to avoid over-reliance on a single supplier. - Incorporate supplier financial health early-warning mechanisms in contracts, such as requiring audited financial reports or retaining termination rights in case of debt defaults. - For existing long-term agreements, assess whether to renegotiate price terms or add guarantees to mitigate potential supply disruptions.

For Foreign Trade Enterprises - Closely track Sanfangxiang's debt restructuring progress and potential change in control, as these could directly impact its export fulfillment capacity. - Prioritize settlement methods like letters of credit or advance payments in export transactions to reduce accounts receivable risk. For existing receivables, promptly assess recoverability and consider legal action. - Leverage the current window of overcapacity and price pressure to renegotiate purchase prices with suppliers, but select financially stable partners to avoid 'low-price traps'.