Shareholders, Sias raise concerns over Chemical Industries’ C-suite resignations, alleged ‘post-retirement perks’

SHAREHOLDERS of Chemical Industries (Far East) (CI) have raised concerns over issues including a spate of senior management resignations, and money spent on alleged “post-retirement perks” awarded to co-founder and emeritus chairman Lim Soo Peng.

The group of its minority shareholders, who claim to own at least 10 per cent of the shares of the mainboard-listed company, also took issue with the nomination of non-management independent director Lim Yew Nghee – the son of Lim Soo Peng – as deputy chairman.

The Business Times understands that the group of shareholders includes Malaysian chemical manufacturing company Batu Kawan, which holds a 6.55 per cent stake in CI.

The letter comes amid the resignations of CI’s chief executive officer (CEO) and chief operating officer (COO) – both of whom have served for less than two years in their current roles.

According to bourse filings, CEO Yeo Sze Chiat and COO Loi Kheng Seong had in October last year handed in their resignations to “pursue (their) self-interest and personal goals”. Both were appointed in September 2022.

Replacements for both positions have not been named.

In addition, the group’s sales and marketing director Yap Yoke Woo, as well as independent director Tay Kin Bee, will leave their positions in February.

In a letter to the company’s board of directors seen by BT, the minority shareholders expressed “grave disappointment at the lack of guidance from the board” at these resignations.

They alleged that these resignations “suggest a failure” of the company’s intention to “transition from a family-run business into a professionally managed organisation”.

The minority shareholders noted that CI’s bottom-line had started to shrink over the past two years.

The company booked a net loss of S$1.6 million for the first half ended Sep 30, sinking into the red from a net profit of S$407,000 in the corresponding year-ago period. Revenue for the period fell 23.6 per cent to S$38.4 million, from S$50.3 million the year before.

This was attributed to lower sales of chemical products in Singapore, stemming from lower demand for chemical products and decreasing prices of commodities amid a weak economic landscape in the first half of 2024.

Prior to its H1 FY2024 loss, CI’s full-year net profit for FY2023 declined 47.7 per cent to S$3.6 million, from S$6.8 million in FY2022.

In light of these losses, the letter’s signatories suggested the “previous successful management should be reappointed in the interest of all the shareholders”.

Questions over perceived perks

Alongside these concerns, the minority shareholders’ January letter also said CI should disclose the amount of money spent on Lim Soo Peng for “post-retirement perks”.

These perceived perks allegedly included using commercially viable space as his personal office, salaries of his personal support staff and personal medical expenses incurred by the company.

“In the interest of professionalisation, we request that this amount be obtained and reported to the minority shareholders,” the letter stated.

Lim Soo Peng, who has a deemed interest of 48.95 per cent stake in the company, was CI’s chairman and managing director till Aug 13, 2020. He was later managing director and executive director from August 2020 to September 2021, and continued to be an executive director till Dec 31, 2021.

He has been a non-executive director since January 2022, and was designated emeritus chairman since Jul 28, 2022.

In its 2023 annual report, the company listed Lim Soo Peng’s remuneration as S$150,000 in directors’ fees. No mention of the alleged perks was listed.

Prior to being redesignated emeritus chairman, the 2022 annual report stated that he was paid S$706,000. This included a salary of S$513,000, a bonus of S$114,000 and a S$75,000 directors’ fee.

As the company is facing losses, the group of minority shareholders said the group should perform an audit to confirm “whether the amount of money being spent on the emeritus chairman’s perks… is a fair and reasonable expense for a non-management position”.

In addition, the shareholders questioned why Lim Yew Nghee was in November appointed non-executive and non-independent deputy chairman of the board “without any reasons given”.

In a bourse filing on Nov 1, the board said Lim Yew Nghee was given the additional responsibility of “assisting the board to set up investment goals and strategies, and to review investment opportunities”.

However, the letter’s signatories said they were concerned that his appointment would come with an increase in directors’ fees.

“In light of the previous years’ losses and the possibility of yet another year of operating losses, we feel that there should be a reduction in directors’ fees instead,” the letter said.

BT has reached out to CI for comment.

Sias questions CI’s board

The letter was also sent to Securities Investors Association Singapore, or Sias, and Singapore Exchange Regulation.

Sias has since responded with queries directed to CI’s board, noting that the company’s transition to professional management may have encountered significant challenges.

Recent developments highlighted by Sias included the successive departures of the CEO, COO, and sales and marketing director.

“Additionally, the impending resignation of an independent director further exacerbates the situation, reducing the board to just four members, including Lim Soo Peng, the non-executive, non-independent emeritus chairman,” said Sias in an e-mail to the board dated Wednesday (Feb 14).

Sias added the resultant vacuum could pose operational risks to the group.

It asked the board if it would conduct a thorough review of the high attrition rate among senior management and assess the group’s corporate culture. It also asked the board to clarify if it was carrying out a search for a new CEO or COO.

Sias asked if the board could provide clarity on the company’s strategic direction amid the current relationship void and operational challenges, and what measures the board would take to ensure the continuity of the group’s operations.

“Clear and proactive communication from the board and management is essential in times of uncertainty,” Sias said, urging the board to address the concerns promptly to restore shareholder confidence.

Shares of CI were trading flat at S$0.59 as at 2.40 pm on Wednesday. The counter is up 6.3 per cent in the year to date.