Research On Financial Distress And Coping Strategy Of Xining Special Steel

In 2015,China's steel industry experienced severe losses,with profits changing from profit to loss.The production and operation difficulties of steel companies had intensified,and the amount of losses continued to expand.In 2016,the supply-side structural reforms were continuously implemented,the supply-demand relationship in the steel industry gradually stabilized,and market pain eased.However,when the operating performance of the steel enterprises ushered in a great success,as the largest resource-based special steel manufacturer in western area,Xining Special Steel Co.,Ltd.(referred to as "Xining Special Steel",600117.SH)reached the top against the trend the king of steel companies in2018.The net profit in 2018 is-18 billion to-24 billion yuan.Looking at the financial statements of Xining Special Steel in recent years,we can know that this is not the first loss.Since 2012,its operating performance has been poor.Non-net profit has been deducted for 7 years,and the amount of losses has reached 5 billion yuan.Xining Special Steel's profitability has fallen sharply.To keep the company from delisting,it depended on non-recurring gains and losses such as subsidies.As the industry improves,Xining Special Steel is still in financial distress.The reasons behind it are thought-provoking.Based on the above background,this paper takes Xining Special Steel as a target case company.From a theoretical perspective,I collected and sorted out financial reports and other related materials of Xining Special Steel.Then I explored whether it was in financial distress and the extent of financial distress based on the Z model and F model.The process of the staged financial distress was analyzed to find the performances and causes of financial distress.Finally,based on the causes of financial distress and its measures to deal with the financial distress,put forward corresponding suggestions.Through calculation and analysis,it is found that Xining Special Steel has been in financial distress since 2012,and its degree has deepened gradually.The financial distress in 2015 and 2018 is the most serious.Financial distress of Xining Special Steel is manifested by huge operating losses,a large backlog of inventory,heavy debt and high financial expenses.From the perspective of external reasons,the macro economy has entered a new normal,and the demand for steel products has changed.But the overcapacity problem is serious at this time.Affected by the relationship between supply and demand,Xining Special Steel suffered a huge loss.At the same time,in order to respond to changes in industrial policies,Xining Special Steel upgraded and renovated the process equipment,etc.The funds used come from debt capital,which leads to an increasing debt burden.From the perspective of internal reasons,it is also related to the unreasonable industrial structure.The fundamental reason is the lack of product research and development,which leads to insufficient core competitiveness of the product,and then in turn leads to no marketable inventory and a large backlog.After the failure of previous forms of financing,Xining Special Steel uses borrowing to to solve the funding needs to meet the daily business and investment projects under construction,which has intensified the expansion of Xining Special Steel's debt scale and rising financial costs,leading to further imbalances in capital structure.Through combining Z model and F model with non-operating factors such as macroeconomics and industry cycles,this paper studies Xining Special Steel in financial difficulties.It is hoped that this paper can reduce the degree of financial distress of Xining Special Steel.It also provides reference value for other steel companies when falling into financial distress.At the same time,it hopes to enrich the theoretical research on financial distress.