Last year, the net profit attributable to the parent company decreased by more than 80% year-on-year. Why did some senior executives at Lubao Chemical see their salaries "rise instead of fall"?

Questioning AI · Reverse growth in senior management compensation at Lubbei Chemical, is the assessment mechanism transparent?

Everyday Economic News Reporter: Peng Fei Everyday Editor: Xu Shaohang

Veteran chemical listed company Lubbei Chemical (SH600727) released its 2025 annual report on the evening of March 30.

Data shows that in 2025, Lubbei Chemical’s net profit attributable to the parent was 38.2712 million yuan, down 85.34% year-on-year, with non-recurring net profit dropping over 90%. However, amid the overall pressure on the company’s main business, some senior executives saw their salaries increase by nearly 100k yuan or even over 300k yuan.

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A capital market insider believes this abnormal phenomenon of severe performance and compensation mismatch runs counter to the regulatory focus on “matching directors and senior management compensation with company performance and individual achievements.”

The Daily Economic News reporter noted that while multiple executives’ salaries increased, Lubbei Chemical’s Secretary responsible for information disclosure, who bears the important task of disclosure, had an annual salary of only about 270k yuan in 2025, ranking at the bottom among company executives. In response, the company’s secretary said it was a “special case, nothing to comment on.”

Main Business Under Pressure Across the Board

In 2025, Lubbei Chemical achieved operating revenue of 100k yuan, down 11.43% year-on-year; total profit was 152 million yuan, down 64.07%; net profit attributable to the parent was 38.2712 million yuan, a decline of 85.34%. Additionally, the “net profit attributable to shareholders of the listed company after deducting non-recurring gains and losses,” which reflects the company’s true profitability, was only 26.4763 million yuan, down 90.13% year-on-year.

The sharp decline in performance is directly attributed to the pressure on two core main businesses—titanium dioxide and methyl chloride.

The annual report shows that titanium dioxide, as Lubbei Chemical’s largest pillar, accounts for 65.06% of main business revenue, but its sales revenue decreased by 16.65% in 2025; the second-largest business, methyl chloride, saw a 30.79% decrease in sales revenue.

Lubbei Chemical explained the “reasons for changes in operating income” as: “Mainly due to the decrease in revenue from titanium dioxide and methyl chloride products in this period.” It also pointed out in “reasons for changes in operating costs”: “Mainly due to the decrease in sales volume of titanium dioxide and methyl chloride products in this period.”

Looking at specific production and sales, Lubbei Chemical’s titanium dioxide sales volume in 2024 was 260.7k tons, down 5.67% year-on-year; methyl chloride sales volume was 392.2k tons, down 18.96%.

Behind this is an adjustment in the macro industry landscape. According to statistics released by the Titanium Dioxide Industry Technology Innovation Strategic Alliance, from 2019 to 2025, China’s titanium dioxide industry’s total output increased from 3.18 million tons to 4.72 million tons, with a slight decrease of 1.0% year-on-year in 2025—the first annual negative growth in nearly 20 years. In 2025, the number of industry-operating companies with full-process production capacity shrank to 36, a reduction of 9 from 2024, accelerating industry consolidation and increasing market concentration.

The methyl chloride industry in 2025 showed signs of “oversupply, deep price drops, and passive export growth,” with supply-demand contradictions offsetting the benefits of lower raw material prices like methanol and liquid chlorine, squeezing corporate profit margins. In this environment, Lubbei Chemical’s main business was under pressure, leading to a significant shrinkage in net profit.

Executives Receive Salary Increases of Over 300k Yuan

Despite net profit attributable to the parent declining by over 80% and main businesses under pressure, Lubbei Chemical’s executive compensation showed an inexplicable “reverse growth.”

According to detailed data disclosed in the “Compensation of Directors and Senior Management” section of Lubbei Chemical’s 2025 annual report, compared to the company’s performance in 2025, the executive team’s salaries are “secure”: Chairman Chen Shuchang’s salary in 2025 was 1.1811 million yuan, an increase of nearly 100k yuan from 1.0846 million yuan in 2024; General Manager Feng Xiangyi’s salary was 1.0228 million yuan in 2025, up 100.5k yuan from 920,300 yuan in 2024; Director, CFO, and Vice General Manager Ma Wenju’s salary increased from 507.6k yuan in 2024 to 816.5k yuan in 2025, an increase of over 300k yuan.

In a context where net profit attributable to the parent was only about 300k yuan, the senior management team still maintained an overall upward trend in both total and individual salaries. In 2025, the “Changes in Shareholdings and Salary of Current and Resigned Directors and Senior Management during the Reporting Period” showed that 13 people received a total pre-tax salary of 6.4062 million yuan, an increase of 173.2k yuan from 270k yuan in 2024 (also 13 people).

When contacted by the Daily Economic News, a market insider familiar with Lubbei Chemical said: “As a state-owned enterprise, with such poor performance, this level of salary is actually quite good.” He further stated that the China Securities Regulatory Commission (CSRC) has clear requirements for listed companies’ director and senior management compensation systems to be performance-linked, “If profits are declining but salaries are still rising, that’s unreasonable.”

In October 2025, the CSRC revised and issued the “Code of Corporate Governance for Listed Companies,” which will take effect from January 1, 2026. The code explicitly states that the compensation of directors and senior management should be aligned with market development, match company performance and individual achievements, and be consistent with sustainable development. It also requires that if a listed company turns from profit to loss or its losses expand compared to the previous fiscal year, and the average performance-based compensation of directors and senior management does not decrease accordingly, the reasons must be disclosed.

On the morning of March 31, regarding the decline in company performance but salary increases for senior executives, the Daily Economic News contacted Lubbei Chemical. A relevant person responded: “Last year’s operations were relatively normal. Although performance declined, management’s work was still qualified, and their salaries did not increase significantly.” The person also emphasized that performance and executive salaries are “based on the workload in their respective areas and their work performance.”

It is noteworthy that Lubbei Chemical’s 2025 annual report states: “During the reporting period, the company’s assessment of senior management combines quantitative and qualitative methods, with differentiated indicators for different positions… The incentive mechanism for senior management mainly involves performance-based compensation… Annual performance-based compensation is based on annual business goals, and is determined according to the company’s operational benefits and individual work performance during the assessment period.”

However, against the backdrop of a sharp decline in net profit attributable to the parent and a more than 90% drop in non-recurring net profit, some senior executives’ performance-based pay “increased instead of decreased,” raising questions about the so-called “quantitative assessment” and its linkage to “business goals.”

The “Low Salary, High Responsibility” Phenomenon of Secretary Needs Explanation

While the chairman and some senior executives enjoy salary increases of nearly 100k yuan or more, the Secretary of the Board, who is a key hub for information disclosure and compliance governance, shows a different situation.

Lubbei Chemical’s 2025 annual report shows that the Secretary of the Board, Lin Hongbo, who took office on May 9, 2025, received an actual annual salary of 269.7k yuan, ranking at the bottom among the company’s senior management.

According to Sina Finance’s “2024 A-Share Secretary Data Report,” the average annual salary of secretaries of A-share listed companies in 2024 was about 754.3k yuan. The Daily Economic News found that compared to Lubbei Chemical, the secretaries of other listed companies in Binzhou City have significantly higher salaries. For example, the secretary of Bohai Automotive earned 902.6k yuan in 2024, Binhai Chemical’s secretary earned 819.2k yuan, and Sanyuan Biological’s secretary earned 600k yuan.

It is worth noting that as statutory senior management personnel explicitly required by the “Company Law of the People’s Republic of China” and the “Code of Corporate Governance for Listed Companies,” the Secretary of the Board bears core statutory responsibilities such as information disclosure, investor relations management, and daily board operations, and is directly responsible for the truthfulness, accuracy, and completeness of periodic reports.

With ongoing regulatory pressure in 2025 on information disclosure violations, the disclosure duties of secretaries are becoming increasingly strict, with penalties ranging from hefty fines to market bans. According to Tonghuashun iFinD data, over 200 listed companies in 2025 were under investigation for suspected disclosure violations, covering main boards, ChiNext, and STAR Market.

On March 17, 2026, the Shenzhen Securities Regulatory Bureau imposed regulatory measures on two listed companies, Yahui Long and Yingji Xin, both penalized for the same reason—using the hot topic of brain-machine interfaces to conduct illegal disclosure. The secretaries of these companies were fined 1.5 million yuan and faced proposed penalties of 800k yuan, respectively.

Based on the 2025 salary level of Lubbei Chemical’s secretary, if the company faces regulatory penalties related to the 2025 annual report or other disclosure issues, the secretary could face significant fines, which might have a major personal impact.

Regarding the “low salary, high responsibility” phenomenon of secretaries, the Daily Economic News asked Lin Hongbo about the risk faced by secretaries given increased regulatory penalties since last year. He responded: “My salary is a special case, nothing to comment on.” He added: “Although there are considerations in this regard, I believe the management recognizes the secretary’s performance, and there will be relevant considerations.”

Daily Economic News