Product Price Increases Fail to Offset Rising Costs; Raw Material Price Fluctuations May Cause Continued Operating Pressure for Zhongce Rubber

(Source: Economic Information Daily)

In March 2026, the domestic tire industry experienced a new round of widespread price increases. Zhongce Rubber Group Co., Ltd. (referred to as “Zhongce Rubber,” 603049.SH) issued a price adjustment notice, stating that starting from March 16, all loader tire products will see price hikes. The company explicitly mentioned that the adjustment is “far below the increase in costs” and did not rule out further price adjustments in the future. Notably, this is Zhongce Rubber’s second product price adjustment notice since September 2025, when some products’ prices were raised. As a newly listed company on the Shanghai Stock Exchange main board since June 2025, the market’s attention to Zhongce Rubber has gone beyond the short-term impact of rising costs. Concerns include ongoing pressure on cash flow and high short-term debt amid a rising cost cycle, with risks of these issues persisting or worsening.

Planning to Conduct Futures Hedging Business

Industry experts generally believe that this round of widespread tire price increases is a collective response to rising raw material costs such as natural rubber, synthetic rubber, and carbon black, as well as rising logistics costs. As of March 16, over 30 domestic tire companies had announced price hikes, with increases mainly between 2% and 5%.

To cope with this cost impact, Zhongce Rubber has taken additional measures besides raising prices on some products. On March 13, the company announced plans to conduct futures hedging for natural rubber, synthetic rubber, and related products to effectively hedge against raw material price fluctuations. The maximum margin and option premium involved are expected not to exceed 600 million yuan. This proposal was approved at the 14th meeting of the company’s second board of directors but still requires approval from the shareholders’ meeting before implementation.

The announcement states that the hedging period will be 12 months from the date of shareholder approval. The funds will come from the company’s own resources, not involving fundraising, and the purpose is strictly limited to hedging raw material price risks, not for profit-making.

Regarding performance, Zhongce Rubber’s 2025 Q3 report shows that the company’s profit scale remains among the industry leaders. However, the cash flow from operating activities, which reflects the company’s core profitability, has declined significantly. In the first three quarters of 2025, Zhongce Rubber achieved operating revenue of 33.683 billion yuan, up 14.98% year-over-year; net profit attributable to shareholders was 3.513 billion yuan, up 9.30%. In Q3 alone, net profit was 1.191 billion yuan, a 76.56% increase, demonstrating strong profit resilience.

Meanwhile, in the first three quarters of 2025, the net cash flow from operating activities was only 830 million yuan, down 62.01% from 2.185 billion yuan in the same period of 2024. This downward trend was already evident in the first half of 2025, when the company reported a net profit of 2.322 billion yuan but only 12.39 million yuan in cash flow from operating activities—down 99.13% year-over-year compared to 1.424 billion yuan in the first half of 2024.

The company explained that the decline in cash flow was mainly due to increased payments for purchasing goods and receiving services. Data shows that in the first three quarters of 2025, cash paid for purchasing goods and services reached 23.499 billion yuan, a 51.12% increase from 15.549 billion yuan in the same period last year, far exceeding the revenue growth rate.

Additionally, the rapid growth of accounts receivable has become an important factor affecting cash inflows. As of the end of September 2025, Zhongce Rubber’s accounts receivable totaled 7.712 billion yuan, a 27.78% increase from the beginning of the year. Industry insiders believe that as the annual report disclosure approaches, the rising raw material costs and the pressure on cash flow in the first three quarters have led investors to pay close attention to whether the company can effectively ease its future funding pressures.

High Level of Current Liabilities

The decline in operating cash flow has also heightened market concerns about Zhongce Rubber’s debt management capabilities, especially as short-term debts are due in large amounts, potentially further increasing repayment pressure amid rising costs.

Financial reports show that although the IPO raised nearly 4 billion yuan in equity funds, the company’s debt level remains relatively high. As of the end of September 2025, total liabilities reached 26.938 billion yuan, with an asset-liability ratio of 52.73%.

From the debt structure perspective, Zhongce Rubber’s high proportion of current liabilities is notable. The financial report indicates that as of September 2025, current liabilities amounted to 23.035 billion yuan. Short-term borrowings totaled 6.754 billion yuan, and non-current liabilities due within one year were 2.96 billion yuan. At the same time, the company’s cash and cash equivalents stood at 5.559 billion yuan.

Meanwhile, the company’s capital expenditure related to capacity expansion remains ongoing. In the first three quarters of 2025, net cash outflow from investing activities was 2.658 billion yuan, an increase of 683 million yuan compared to the same period last year, mainly used for projects such as the Changzhou Jintan new energy tire plant and the Mexico factory.

Furthermore, Zhongce Rubber and its subsidiaries plan to provide an additional guarantee limit of 9.911 billion yuan for their wholly owned subsidiaries in 2026, which has also attracted market attention regarding potential debt risks. On December 5, 2025, the company disclosed that the guarantee limit for external guarantees in 2026 is expected to reach 9.911 billion yuan, including 2.76 billion yuan for subsidiaries with asset-liability ratios of 70% or higher.

The announcement states that as of October 31, 2025, the total guarantees provided by Zhongce Rubber and its subsidiaries to other subsidiaries amounted to 1.595 billion yuan, accounting for 9.13% of the latest audited net assets. Zhongce Rubber emphasized that these guarantees are for wholly owned subsidiaries within the consolidated scope, and the company can effectively control and prevent guarantee risks without harming the interests of the company or shareholders.

Industry experts expect that, under the influence of geopolitical tensions, the volatility of core raw materials such as crude oil and natural rubber will persist, putting continued pressure on industry costs. For Zhongce Rubber, product price adjustments may help offset some of the cost increases and ease operational pressures. However, in the context of intensified industry competition, expanding guarantee exposure could increase the company’s overall financial risk. The company’s 2025 annual report, as well as ongoing efforts in cost control, cash flow improvement, and debt risk management, will continue to be closely monitored.