SHENGLONG INTL (08481.HK): Land of Lin'an, Hangzhou plant resumed by the government; total compensation of approximately RMB 364 million
- The government-acquired land has a site area of approximately 98,628 square metres and the buildings erected on it occupy approximately 57,777.41 square metres; demolition of the plant is expected to be completed in 2026, and the Group expects to receive the remaining compensation around November 2026.
- Of the total compensation, RMB 80 million was payable within 30 days after the compensation agreement took effect on 23 November 2024, and the balance is payable in full within 30 days after Zhejiang Shenglong completes the delivery of the government-acquired land and the cancellation of the real estate title certificates.
- The total compensation of approximately RMB 364 million will not be sufficient to cover the capital expenditure on the new plant in Shexian County, Huangshan City, and the demolition and relocation expenses, and the Company does not expect the land resumption to generate favourable cash flow for the financial statements for the financial year ending 31 December 2026.
NewTimeSpace News: On 11 September 2026, SHENGLONG SPLENDECOR INTERNATIONAL LIMITED (stock code: 08481) published an inside information announcement on the receipt of land resumption compensation. Under a notice issued on 20 August 2026 by the People's Government of Lin'an District, Hangzhou (the "local government") to Zhejiang Shenglong Decorative Materials Co., Ltd. ("Zhejiang Shenglong"), an indirect wholly-owned subsidiary of the Company, the operation of the decorative paper manufacturing plant at No. 55, Shangyang Road (the "government-acquired land") is not in compliance with local government policy, which restricts government land acquisition to the development of the biopharmaceutical and advanced chemical new materials industries, namely the Catalogue of Prohibited, Restricted and Controlled Projects for the Tianmu Pharmaceutical Port Chemical Industry Cluster (Trial) (Lin Fagai [2024] No. 59). The government authorities have accordingly required the Company to relocate Zhejiang Shenglong's plant and buildings from the site in accordance with the relevant policy.
Under the compensation agreement dated 23 November 2024 and the supplementary compensation agreement dated 26 December 2024 entered into between Zhejiang Shenglong and the Jinnan Sub-district Office of the People's Government of Lin'an District, Hangzhou, Zhejiang Shenglong is required to return the land use rights and the ownership of the buildings on the government-acquired land in full to the local government. The total compensation payable for the resumption of the government-acquired land is approximately RMB 364 million, of which RMB 80 million was payable by the local government within 30 days after the compensation agreement took effect on 23 November 2024, while the balance is payable in instalments and in full within 30 days after Zhejiang Shenglong completes the delivery of the government-acquired land and the cancellation of the real estate title certificates. Although the compensation agreements were entered into in 2024, the nature of the compensation payable by the local government was only determined in the government notice issued on 20 August 2026. As at the date of the announcement, the Company had received approximately RMB 181 million.
The government-acquired land is located at No. 55, Shangyang Road, Lin'an, with a site area of approximately 98,628 square metres, and the buildings erected on it occupy approximately 57,777.41 square metres. Under the local government policy, the government-acquired land is restricted to the biopharmaceutical and advanced chemical new materials industries. Demolition of the plant is expected to be completed in 2026, and the Group expects to receive the remaining compensation after completion of the demolition and the cancellation of the real estate title certificates around November 2026. The Company has obtained legal advice from its PRC lawyers on the government notice and has been advised that Zhejiang Shenglong is required to return the government-acquired land under the relevant PRC laws and regulations and has no discretion to act otherwise.
To replace the plant on the government-acquired land, the Company has established another plant in Shexian County, Huangshan City, Anhui Province (with acquisition costs of land use rights of approximately RMB 36.85 million and a construction contract of RMB 220 million, as disclosed in the Company's announcements of June and July 2024), which commenced operation in the second quarter of 2026. The Company stated that the total compensation of approximately RMB 364 million will not be sufficient to cover the capital expenditure on the new plant and the demolition and relocation expenses, and that it therefore does not expect the land resumption to generate favourable cash flow for the financial statements for the financial year ending 31 December 2026 after receiving the total compensation in full. Following the relocation to Shexian County, Huangshan City, the Company has been able to fully resume its daily operations and, compared with the previous production capacity level, the land resumption has not caused any material adverse long-term impact on the Group's production capacity. Having considered the above, the Board considers that the land resumption is fair and reasonable and in the interests of the Company and its shareholders as a whole.
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