China Merchants Shekou: Single Quarter Loss of 1.5 Billion, High Proportion Dividend Distribution Despite Cash Flow Pressure, Employee Salary Cuts While Senior Executives Including Zhu Wenkai Receive Raises

Source | Finance No. 9

Author | Pang Hu

In March 2026, China Merchants Shekou (001979.SZ) disclosed its 2025 annual report. This performance report, carrying market expectations for the state-owned real estate giant, ultimately shocked the market with nearly “cut in half” performance.

Data from the annual report show that the company not only recorded its worst revenue in nearly five years but also posted its lowest profit since listing. Coupled with pressure on cash flow, high debt levels, and imbalanced executive and employee compensation distribution, this SOE-backed real estate company is facing unprecedented operational difficulties. The underlying issues reflect not only strategic shortcomings but also the brutal reality of the deep adjustment period in the real estate industry.

1

Performance plummets, quarterly losses,

Profitability may be at risk

The sharp decline in performance, turning 2025 into the “worst year,” with massive losses in the fourth quarter breaking the profit bottom line, is the most striking aspect of China Merchants Shekou’s 2025 annual report.

According to the report, the company achieved an operating revenue of 154.728 billion yuan for the year, down 13.53% year-on-year, hitting its lowest level in nearly five years, indicating a continuous decline in core operational capacity. Profit performance is even more alarming, with net profit for the year at only 700.4 million yuan, plunging 83% year-on-year; net profit attributable to the parent also shrank significantly from 4.016 billion yuan in 2024 to 1.024 billion yuan, a drop of 74%. This profit performance may become its worst record since listing.

What’s more shocking is the extreme divergence in quarterly results, especially the massive loss in the fourth quarter, which fully exposed the company’s operational fragility. According to the third quarter report of 2025, as of September 30, the net profit attributable to the parent was 2.497 billion yuan, meaning that in the fourth quarter, China Merchants Shekou lost nearly 1.5 billion yuan in a single quarter—an extremely rare occurrence in its operational history.

This abnormal loss is not accidental, stemming from two main factors: first, the company made concentrated provisions for inventory devaluation in the fourth quarter, with total asset impairment provisions for the year reaching 4.27 billion yuan, directly reducing net profit attributable to the parent by 2.918 billion yuan. This is due to the devaluation of high-priced land acquisition projects in earlier years under current market conditions.

Second, the settlement rhythm was abnormal, with some projects scheduled to recognize revenue delayed to 2026, resulting in a stark contrast between the high revenue of 65 billion yuan in the fourth quarter and the massive loss. This highlights the awkward reality that the gross profit margin of settled projects is approaching the break-even point. The dilemma of “selling more, losing more” reveals deep-seated issues in its profit model.

A detailed breakdown of profit composition shows that the quality of profits has severely declined. In 2025, the company’s net profit attributable to the parent after deducting non-recurring gains and losses was only 169 million yuan, a 93.10% drop year-on-year. This means that after excluding 855 million yuan of non-recurring gains and losses, the core main business was nearly at the break-even point. These non-recurring gains mainly include fair value change gains (517 million yuan), government subsidies (87 million yuan), and other one-time income, which do not reflect the company’s true profitability, further confirming that the profit plunge is due to fundamental operational difficulties rather than short-term financial adjustments.

Meanwhile, a significant contraction in investment income worsened profit decline. In 2025, investment income was only 700.8 million yuan, far below 3.892 billion yuan in the same period of 2024. The core reason is the impact of industry contraction, with reduced dividends from joint ventures and associated projects, and fewer opportunities for equity disposals—almost eliminating previous profit supplement channels.

2

Cash flow and debt under dual pressure:

Tightening funds, soaring debt repayment risks

Behind the declining performance are pressures on cash flow and debt, with ongoing hidden dangers to the capital chain—this is the core operational risk for China Merchants Shekou in 2025, likely exceeding market expectations.

Data shows that by the end of 2025, the company’s cash on hand was only 86.1 billion yuan, down 14 billion yuan from 100.3 billion yuan at the end of the previous year—a decrease of 13.96%. The continuous shrinkage of available funds directly weakens its ability to respond to market risks and repay maturing debts. This figure is at its lowest in nearly five years, with the safety cushion steadily thinning.

In stark contrast, the company’s short- and long-term debt levels continued to rise, creating a vicious cycle of “shrinking cash, increasing debt.” Short-term debt increased from 1.379 billion yuan at the end of 2023 to 2.954 billion yuan at the end of 2025, a 114.21% increase over two years. Short-term non-current liabilities also grew from 496.6 billion yuan at the end of 2024 to 589 billion yuan at the end of 2025, an increase of over 100 billion yuan, significantly increasing short-term repayment pressure. Long-term debt also grew from 1.188 trillion yuan at the end of 2023 to 1.409 trillion yuan in 2025, an 18.6% increase. The continued expansion of long-term debt further burdens the company’s finances, with future interest payments eroding already thin profits.

The ongoing decline in cash flow worsens the capital chain, becoming a “big stone” pressing on the company’s operations. In 2025, the net cash flow from operating activities dropped to 96.9 billion yuan, a sharp decline from the usual two- or three-hundred-billion-yuan levels, a 69.67% decrease. This directly reflects the deterioration of the company’s sales collection ability—despite property sales, funds are not being recovered. Stricter pre-sale fund supervision and declining buyer payment capacity hinder cash inflows, posing a greater risk than profit decline and directly affecting daily operations.

More concerning is that the company’s financing cash flow has been in net outflow for several years, indicating a weakening external financing capacity. In the context of an industry where financing remains difficult, China Merchants Shekou’s reliance on bank loans and bond issuance to secure sufficient funds is increasing, forcing it to depend on self-generated cash flow and existing funds to sustain operations.

Although the company repeatedly emphasizes that it remains within the “three red lines” with a debt ratio of 64.17%, net debt ratio of 72.46%, and a cash short-term debt ratio of 1.19 at the end of 2025, the reduction in cash on hand, shrinking operating cash flow, and expanding debt levels have put its capital chain under strain. If subsequent sales recovery does not improve or if there is a concentrated debt repayment pressure, operational risks will be significant.

3

Normal employees face pay cuts while executives see salary increases,

High dividend payout ratios raise doubts about sustainability

If the performance and capital difficulties are the result of industry cycles and operational strategies, then the severe imbalance in compensation distribution exposes deep internal governance issues, sparking widespread market controversy. Under tight cash flow and massive losses, high dividend payout decisions seem even more unreasonable.

Data shows that at the end of 2025, the company employed 49,135 people, roughly the same as the previous year’s 49,501, with no large-scale layoffs, seemingly maintaining stability. However, the pay and benefits of ordinary employees and executives show a stark contrast.

Ordinary employees face clear salary cuts, especially sales staff. The report indicates that sales expenses for employee wages decreased from 280 million yuan in 2024 to 255 million yuan in 2025, while the number of sales employees increased from 1,270 to 1,480—a 16.53% rise. Simple calculations show that average annual salary per sales employee dropped from about 220,400 yuan in 2024 to 172,300 yuan in 2025, a reduction of nearly 50,000 yuan or over 21%. Management salaries also declined slightly from 1.6 billion yuan in 2024 to 1.597 billion yuan in 2025, but given the sharp drop in performance, ordinary employees bore the main cost of the downturn.

In stark contrast, executive salaries not only did not decrease but increased significantly, revealing privileged “guaranteed income.” For example, Chairman Jiang Tiefeng’s salary in 2024 was 2.4177 million yuan, while the current Chairman Zhu Wenkai’s salary in 2025 rose to 2.55 million yuan—higher than his previous annual salary of 2.32 million yuan as general manager.

Other senior executives also saw notable salary increases: General Manager Wu Bin’s salary rose from 1.63 million to 1.99 million yuan (a 22.09% increase); Vice President Lü Bin from 1.66 million to 2.12 million yuan (27.71%); Vice President Liu Ye from 1.63 million to 2.10 million yuan (28.83%).

Amidst plummeting performance, massive quarterly losses, salary cuts for ordinary employees, and tightening cash flow, the rise in executive pay not only severely dampens employee morale but also violates the principle of “sharing benefits and risks.” It highlights internal incentive mechanism imbalances and irrationality.

What’s more puzzling is that despite massive losses and cash flow pressures, China Merchants Shekou still insists on high dividend payout ratios, raising doubts about the rationality of such decisions. The annual report shows a cash dividend of 0.0511 yuan per share, totaling about 460 million yuan, accounting for 45% of net profit attributable to the parent. The dividend payout ratio in 2024 also exceeded 40%. This proportion is already high in the industry.

Even more noteworthy is the company’s “Dividend Return Plan for the Next Three Years (2026-2028),” which states, “The company generally conducts annual cash dividends, with the proportion of cash dividends not less than 40% of net profit attributable to shareholders each year from 2026 to 2028.” If future performance continues to decline, can China Merchants Shekou sustain such high payout ratios? Don’t give the market false promises.

From industry background, in 2025, the real estate market continued its deep adjustment, with nationwide commercial housing sales down 12.6% year-on-year. Many developers face difficulties in receivables and tight funds, often choosing to reduce dividends and retain capital to hedge risks. Yet, despite a near 15 billion yuan quarterly loss, shrinking cash reserves, and increasing debt pressure, China Merchants Shekou still paid out 460 million yuan in dividends—seemingly shareholder-friendly, but the long-term rationality of this decision warrants scrutiny.

In summary, China Merchants Shekou’s 2025 annual report is a warning-filled performance sheet: record performance decline, fourth-quarter massive loss exposing profitability crisis; shrinking cash flow and high debt levels threatening the capital chain—core risks constraining development; internal governance issues highlighted by salary disparities; high dividend payout ratios disconnected from operational realities, raising doubts about decision rationality.

For China Merchants Shekou, unless these issues are properly addressed—optimizing investment strategies, restructuring debt, improving internal governance, and balancing stakeholder interests—the company may face even more severe operational challenges ahead. This report also sounds an alarm for the entire real estate industry: during deep adjustment periods, state-owned developers must abandon illusions of advantage, focus on core competitiveness, to achieve sustainable development.