Financial Performance - For the first half of 2022, the company reported revenue of RMB 10,131.7 million, a decrease of 2.5% compared to RMB 10,392.0 million in the same period of 2021[6]. - Gross profit for the same period was RMB 2,304.4 million, down 22.9% from RMB 2,994.3 million, resulting in a gross margin of 22.7%, compared to 28.8% in 2021[6]. - Operating profit decreased to RMB 822.8 million, representing an operating margin of 8.1%, down from 16.2% in the previous year[6]. - The net profit attributable to equity holders was RMB 477.0 million, a decline of 60.4% from RMB 1,203.5 million in the first half of 2021[6]. - Basic earnings per share for the first half of 2022 were RMB 0.11, compared to RMB 0.28 in the previous year[6]. - The net profit for the first half of 2022 was RMB 468,716,000, representing a significant decline of 62.5% compared to the previous year[12]. - Operating revenue was RMB 10,131,698 thousand, a decrease of 2.5% compared to RMB 10,392,021 thousand in the same period of 2021[100]. - The reported segment profit for the six months ended June 30, 2022, was RMB 1,164,661 thousand, down from RMB 1,905,042 thousand in the same period of 2021, indicating a decrease of about 38.8%[116]. Assets and Liabilities - The company’s total assets as of June 30, 2022, were RMB 30,973.0 million, an increase from RMB 28,963.7 million at the end of 2021[7]. - Total liabilities rose to RMB 11,771.8 million from RMB 10,209.8 million, resulting in a net debt-to-equity ratio of 6.0%, up from 5.6%[7]. - As of June 30, 2022, the company's total liabilities reflect a strategic focus on managing financial obligations effectively amidst ongoing market challenges[145]. - The company's total equity attributable to shareholders rose to RMB 18,936,357 thousand from RMB 18,488,234 thousand, an increase of 2.42%[104]. - The company's net assets increased to RMB 19,201,243 thousand from RMB 18,753,882 thousand, marking a growth of 2.38%[103]. Cash Flow and Financing - Cash generated from operating activities was RMB 1,262.4 million, down from RMB 2,021.0 million in the same period last year[6]. - The net cash flow from operating activities for the first half of 2022 was RMB 1,262,395,000, a decrease of RMB 758,570,000 compared to RMB 2,020,965,000 in the same period of 2021[42]. - The net cash generated from financing activities was RMB 470,136 thousand, compared to a net cash used of RMB (935,588) thousand in the same period of 2021[106]. - The company borrowed RMB 2,292,000 thousand in financing activities, significantly up from RMB 912,000 thousand in the same period of 2021[106]. Market and Sales Performance - In the first half of 2022, the company's cement sales volume decreased by 15.7% to 21,192 thousand tons compared to the same period in 2021[20]. - The average selling price of cement increased by 16.2% to RMB 393.0 per ton, while the average selling price of clinker rose by 26.8% to RMB 334.0 per ton[21]. - The overall cement market in China faced significant challenges, including demand contraction and rising costs due to external factors like the Russia-Ukraine crisis[9]. - High-grade cement sales decreased by 14.9% to 19,907 thousand tons, while low-grade cement sales decreased by 26.4% to 1,285 thousand tons compared to the same period last year[26][27]. - The company expects higher demand for cement products in the second half of the year due to the construction season starting in the second quarter[117]. Operational Strategy and Future Plans - The company is focusing on expanding its market presence and enhancing operational efficiency to improve profitability in the future[6]. - New product development and technological advancements are being prioritized to meet market demands and drive growth[6]. - The company aims to enhance internal management to improve production quality and sustainable profitability[12]. - The company plans to enhance customer service, expand the market, and stabilize prices to increase sales in the second half of the year[56]. - The company aims to strengthen production management and optimize production technology to reduce costs and improve efficiency[56]. Legal and Governance Issues - The company is facing a winding-up petition in the Cayman Islands, initiated by a shareholder, Tianrui, and has engaged legal counsel to address this matter[74]. - The company has been involved in significant litigation in Hong Kong against former directors, seeking various injunctive relief and damages due to alleged misconduct[81]. - The company has faced multiple court hearings regarding the winding-up petition and related claims, with a case management hearing scheduled for November 22, 2022[79]. - The company has ongoing litigation related to the acquisition of Liaocheng Meijing Zhongyuan Cement Co., with a payable amount of RMB 30,678 thousand as of June 30, 2022[143]. - The group is currently facing a winding-up petition in the Cayman Islands, initiated by a shareholder, Tianrui (International) Holdings Limited, and has engaged legal counsel for this matter[156]. Employee and Management Information - The company has 17,699 employees as of June 30, 2022, and emphasizes training for technical talent to improve work performance[57]. - Executive Director Li Huibao ceased to serve as President of Shandong Shanshui Cement Group Co., Ltd. since March 22, 2022[172]. - Li Huibao's annual basic salary is RMB 3.6 million, with bonuses based on performance indicators and assessment results calculated from this base salary[172]. - Key management personnel compensation for the six months ended June 30, 2022, was RMB 5,256,000, a decrease of 6.5% from RMB 5,623,000 in the same period of 2021[166]. Related Party Transactions - The total amount of related party transactions under the framework agreements with China National Building Material Group was RMB 619,199 thousand, with an annual cap of RMB 2,592,725 thousand[96]. - The group reported significant related party transactions, including sales of RMB 10,886,000 to subsidiaries of major shareholders, down 71.5% from RMB 38,322,000 in the same period of 2021[162]. - Mining service fees paid to subsidiaries of major shareholders amounted to RMB 250,060,000, up 17.3% from RMB 212,933,000 in the prior period[162].

Financial Performance - The company reported a total revenue of RMB 10.5 billion for the fiscal year 2021, representing a year-on-year increase of 15%[1] - The net profit for the year was RMB 1.2 billion, which is a 20% increase compared to the previous year[1] - Total revenue for 2021 reached RMB 24,659,544 thousand, an increase of 8.5% compared to RMB 20,891,454 thousand in 2020[7] - Gross profit for 2021 was RMB 7,259,549 thousand, with a gross margin of 29.4%, down from 33.3% in 2020[7] - Net profit attributable to equity holders was RMB 2,777,298 thousand, a decrease of 12.8% from RMB 3,186,993 thousand in 2020[7] - Operating profit margin decreased to 17.0% in 2021 from 22.3% in 2020[7] - Cash generated from operating activities was RMB 3,553,072 thousand, slightly up from RMB 3,509,672 thousand in 2020[9] - The company's revenue for the year was RMB 24,659,544,000, an increase of 18.0% compared to the previous year[32] - The gross profit for the year was RMB 7,259,549,000, which is a 4.2% increase from RMB 6,964,665,000 in 2020[45] - The operating profit decreased by 9.9% to RMB 4,198,280,000, down from RMB 4,659,112,000 in the previous year[45] - The total sales cost as a percentage of revenue increased to 70.6%, up 3.9 percentage points from 66.7% in the previous year[47] Production and Sales - The cement production volume reached 15 million tons, up 10% from the previous year[1] - Cement sales volume increased to 55,832 thousand tons in 2021, up from 51,250 thousand tons in 2020, representing a growth of 9.1%[10] - The average selling price of cement rose to RMB 362.0 per ton in 2021, compared to RMB 330.7 per ton in 2020, an increase of 9.5%[10] - The total sales of cement reached 55,832 thousand tons, representing an increase of 8.9% year-on-year[32] - High-grade cement sales reached 52,099 thousand tons, a year-on-year increase of 14.8%, while low-grade cement sales dropped to 3,733 thousand tons, a decrease of 36.4%[41] - The sales volume of concrete increased by 26.4% to 3,553 thousand cubic meters[37] - The average selling price of concrete decreased by 6.0% to RMB 427.2 per cubic meter[37] Market Expansion and Strategy - The company plans to expand its market presence in the northeastern region of China, targeting a 25% market share by 2025[1] - New product lines, including eco-friendly cement, are expected to contribute an additional RMB 500 million in revenue in the next fiscal year[1] - A strategic partnership with local construction firms is anticipated to enhance project delivery efficiency by 30%[1] - The company aims to achieve a 10% reduction in production costs through operational efficiencies by the end of 2022[1] - Plans for potential acquisitions in the Shandong region are under consideration to bolster market position[1] - The management has provided a revenue guidance of RMB 12 billion for the next fiscal year, reflecting a growth target of 14%[1] Financial Position and Assets - Total assets increased to RMB 28,963,687 thousand in 2021, up from RMB 27,677,443 thousand in 2020[8] - The debt-to-equity ratio improved to 5.6% in 2021 from 13.9% in 2020, indicating a stronger financial position[8] - The group's total liabilities decreased by 13.4% to RMB 10,209,805,000 from RMB 11,795,426,000 in the previous year[53] - The net capital debt ratio improved to 5.6%, a decrease of 8.3 percentage points compared to 13.9% in 2020[53] - The cash and cash equivalents balance at the end of the year was RMB 1,423,171,000, reflecting a net change of RMB 16,028,000[58] Operational Capacity - As of December 31, 2021, the total cement production capacity of the group is 94,790 thousand tons, and the total clinker production capacity is 50,472 thousand tons[15] - The Shandong region has the highest cement capacity at 51,470 thousand tons and clinker capacity at 25,928 thousand tons[15] - The Northeast operational area has a cement capacity of 27,250 thousand tons and clinker capacity of 14,304 thousand tons[15] - The group operates multiple production facilities across Shandong, Liaoning, Inner Mongolia, Shanxi, Shaanxi, and Xinjiang regions[16] Research and Development - The company has allocated RMB 300 million for research and development of new technologies in cement production[1] - The group continues to explore new technologies and products to enhance its competitive edge in the cement industry[20] - The company is committed to developing new technologies and products to improve its competitive edge in the cement industry[27] Environmental and Regulatory Considerations - The implementation of "dual carbon" policies is anticipated to significantly impact the cement industry, promoting low-carbon development and industry upgrades[72] - The company plans to enhance its carbon reduction technology investments and participate actively in the carbon trading market[72] - The company aims to implement technology upgrades to improve energy efficiency and reduce emissions, aligning with the industry's dual carbon goals[78] Corporate Governance - The company has adopted the corporate governance code principles and has committed to maintaining high standards of corporate governance[150] - The board of directors consists of 3 executive directors and 3 independent non-executive directors, ensuring a balanced and independent governance structure[155] - The company has established a code of conduct for directors regarding securities trading, which all directors confirmed compliance with during the reporting period[153] - The Audit Committee consists of three independent non-executive directors, ensuring oversight of the company's financial reporting and risk management processes[167] Legal and Compliance Issues - The company is currently involved in significant litigation in the Cayman Islands, with a petition for liquidation filed by shareholder Tianrui International[191] - The company is actively defending against claims related to the cancellation of certain convertible bonds issued in 2018[193] - The ongoing litigation is expected to impact the company's operations and financial performance, although specific financial implications are not detailed in the provided documents[198]

SUNNSY CHINA SHANSHUI CEMENT GROUP LIMITED 中國山 水 水 泥 集 團 有 限 公 司 (於開曼群島註冊成立的有限公司) 股份代號：691 2021 中期報告 211 目 錄 | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | |---------------|-------|-------|-------------------------------|-------|-------|-------|-------|-------|-------|-------|-------|-------|-------|-------|-------|-------|-------|-------|-------|-------|-------|-------|-------|-------| | (I) | | | 釋義 . ...

[Financial and Business Data Summary](index=7&type=section&id=%28III%29%20Financial%20and%20Business%20Data%20Summary) [Consolidated Income Statement Summary](index=7&type=section&id=1.%20Consolidated%20Income%20Statement) Operating revenue fell **2.7%** to **20.89 billion yuan**, but net profit rose **8.1%** to **3.27 billion yuan**, with basic EPS at **0.73 yuan** 2016-2020 Consolidated Income Statement Summary | Metric (RMB in thousands) | 2020 | 2019 | 2018 | 2017 | 2016 | | :--- | :--- | :--- | :--- | :--- | :--- | | **Operating Revenue** | 20,891,454 | 21,478,831 | 17,872,818 | 14,773,644 | 11,284,193 | | **Gross Profit** | 6,964,665 | 7,271,722 | 5,923,471 | 4,412,403 | 2,476,001 | | **Gross Profit Margin** | 33.3% | 33.9% | 33.1% | 29.9% | 21.9% | | **Operating Profit** | 4,659,112 | 4,692,516 | 3,779,350 | 1,980,514 | 238,161 | | **Net Profit / (Loss)** | 3,274,390 | 3,028,382 | 2,168,847 | 546,470 | (978,861) | | **Attributable to Equity Holders of the Company** | 3,186,993 | 2,973,104 | 2,196,657 | 600,817 | (738,281) | | **Basic Earnings / (Loss) Per Share (Yuan)** | 0.73 | 0.68 | 0.62 | 0.18 | (0.22) | [Consolidated Statement of Financial Position Summary](index=7&type=section&id=2.%20Consolidated%20Statement%20of%20Financial%20Position) Total assets grew to **27.68 billion yuan** by 2020 year-end; total liabilities fell **17.1%** to **11.80 billion yuan**, improving the net capital-to-debt ratio to **13.9%** 2016-2020 Consolidated Statement of Financial Position Summary | Metric (RMB in thousands) | 2020 | 2019 | 2018 | 2017 | 2016 | | :--- | :--- | :--- | :--- | :--- | :--- | | **Total Assets** | 27,677,443 | 26,827,805 | 26,072,713 | 25,089,959 | 25,920,156 | | **Total Liabilities** | 11,795,426 | 14,227,366 | 16,486,377 | 21,072,428 | 22,663,917 | | **Equity Attributable to Equity Holders of the Company** | 15,702,798 | 12,497,200 | 9,522,248 | 3,915,327 | 3,098,688 | | **Net Capital-to-Debt Ratio** | 13.9% | 27.6% | 42.6% | 76.4% | 81.9% | [Consolidated Cash Flow Statement Summary](index=8&type=section&id=3.%20Consolidated%20Cash%20Flow%20Statement) Net operating cash inflow was **3.51 billion yuan** in 2020, a decrease from prior year; investing and financing activities had net outflows of **1.33 billion yuan** and **2.13 billion yuan** 2016-2020 Consolidated Cash Flow Statement Summary | Metric (RMB in thousands) | 2020 | 2019 | 2018 | 2017 | 2016 | | :--- | :--- | :--- | :--- | :--- | :--- | | **Net Cash from Operating Activities** | 3,507,072 | 4,166,604 | 2,180,478 | 1,865,912 | 978,342 | | **Net Cash Used in Investing Activities** | (1,325,379) | (1,520,899) | (849,094) | (577,489) | (418,809) | | **Net Cash Used in Financing Activities** | (2,132,673) | (2,600,085) | (348,529) | (1,253,495) | (509,959) | | **Increase in Cash and Cash Equivalents** | 49,020 | 45,620 | 982,855 | 34,928 | 49,574 | [Key Business Data Summary](index=8&type=section&id=4.%20Key%20Business%20Data) Cement and clinker sales grew **7.8%** and **6.0%** respectively, but unit prices fell (cement **9.0%**); concrete volume and price both dropped by **12.2%** and **8.7%** 2016-2020 Key Business Data | Metric | 2020 | 2019 | 2018 | 2017 | 2016 | | :--- | :--- | :--- | :--- | :--- | :--- | | **Cement Sales Volume (thousand tonnes)** | 51,250 | 47,546 | 39,186 | 41,131 | 43,959 | | **Clinker Sales Volume (thousand tonnes)** | 8,699 | 8,205 | 9,953 | 9,232 | 10,544 | | **Concrete (thousand cubic meters)** | 2,812 | 3,204 | 2,882 | 3,420 | 2,680 | | **Cement Average Selling Price (Yuan/tonne)** | 330.7 | 363.6 | 337.2 | 276.3 | 199.0 | | **Clinker Average Selling Price (Yuan/tonne)** | 263.9 | 278.0 | 270.9 | 239.8 | 164.6 | | **Concrete Average Selling Price (Yuan/cubic meter)** | 454.6 | 497.8 | 459.1 | 349.8 | 252.8 | [Company Overview](index=9&type=section&id=%28IV%29%20Company%20Overview) [Company Background and Business Layout](index=9&type=section&id=%281%29%20Company%20Background) China Shanshui Cement Group, a nationally supported large-scale enterprise listed in 2008, operates through Shandong Shanshui across over a dozen provinces, ranking **6th** in production scale - The company is a nationally supported large-scale cement enterprise, operating through Shandong Shanshui across more than a dozen provinces, holding a leading industry position[11](index=11&type=chunk) [Shareholding Structure](index=10&type=section&id=%282%29%20Group%27s%20Shareholding%20Structure) The company's diversified shareholding structure includes major shareholders like Tianrui Group, CSI, Asia Cement, and China National Building Material Group, fostering industrial synergy - The company's shareholding structure shows major shareholders include Tianrui Group (**21.85%**), CSI (**19.47%**), China National Building Material Group (**12.94%**), and Asia Cement (**9.84%**) among others[13](index=13&type=chunk)[111](index=111&type=chunk) [Production Facilities and Capacity](index=11&type=section&id=%283%29%20Production%20Facilities%20Distribution%20and%20Capacity) By 2020 year-end, total cement capacity was **103 million tonnes** and clinker **51.55 million tonnes**, mainly in Shandong, Northeast, Shanxi, and Xinjiang, with Shandong holding **56.7%** of cement capacity Cement and Clinker Capacity by Operating Region (as of December 31, 2020) | Operating Region | Cement Capacity (thousand tonnes) | Clinker Capacity (thousand tonnes) | | :--- | :--- | :--- | | **Shandong Region** | 58,485 | 26,208 | | Shanxi Operating Region | 14,399 | 8,640 | | Northeast Operating Region | 26,600 | 15,104 | | Xinjiang Operating Region | 3,680 | 1,600 | | **Total** | **103,164** | **51,552** | [Management Discussion and Analysis](index=21&type=section&id=%28V%29%20Management%20Discussion%20and%20Analysis) [Operating Environment and Industry Overview](index=21&type=section&id=1.%20Operating%20Environment%20and%20Industry%20Overview) Despite COVID-19, China's economy grew **2.3%** in 2020, supporting cement demand; the industry saw **1.6%** output growth and **183.3 billion yuan** profit, a slight **2.1%** decline - China's GDP grew **2.3%** year-on-year in 2020, with fixed asset investment increasing by **2.9%**, providing demand support for the cement industry[30](index=30&type=chunk) - The cement industry's full-year output reached **2.38 billion tonnes**, a year-on-year increase of **1.6%**; industry profit was **183.3 billion yuan**, a year-on-year decrease of **2.1%**, demonstrating strong resilience[30](index=30&type=chunk) [Company Business Review](index=22&type=section&id=2.%20Company%20Business%20Review) Operating revenue fell **2.7%** to **20.89 billion yuan** due to lower prices, but net profit grew **8.1%** to **3.27 billion yuan** from increased sales and cost efficiency, with total cost of sales at **66.7%** of revenue - During the reporting period, the company's cement sales volume increased by **7.8%** year-on-year, clinker sales volume increased by **6.0%**, but concrete sales volume decreased by **12.2%**[32](index=32&type=chunk) - The main reasons for profit growth were increased sales volume and cost reduction and efficiency improvement measures, with profit attributable to shareholders of the company increasing by **7.2%** year-on-year[46](index=46&type=chunk) [Business Analysis](index=22&type=section&id=%28I%29%20Business%20Analysis) Cement remains the core revenue source at **80.6%**; despite sales growth for cement (**7.8%**) and clinker (**6.0%**), unit prices fell (**9.0%** and **5.1%**), causing overall revenue decline with regional variations 2020 Product Revenue Analysis | Product | Sales Amount (RMB in thousands) | Proportion | Y-o-Y Change | | :--- | :--- | :--- | :--- | | Cement | 16,847,525 | 80.6% | -2.0% | | Clinker | 2,282,506 | 10.9% | 0.7% | | Concrete | 1,270,932 | 6.1% | -19.5% | | Other | 490,491 | 2.4% | 9.3% | | **Total** | **20,891,454** | **100%** | **-2.7%** | 2020 Sales Amount Analysis by Operating Region | Operating Region | Sales Amount (RMB in thousands) | Proportion | Y-o-Y Change | | :--- | :--- | :--- | :--- | | Shandong Region | 13,512,053 | 64.7% | -6.7% | | Northeast Operating Region | 4,362,344 | 20.9% | 12.8% | | Shanxi Operating Region | 2,527,008 | 12.1% | 3.1% | | Xinjiang Operating Region | 490,049 | 2.3% | -27.7% | | **Total** | **20,891,454** | **100%** | **-2.7%** | [Profitability Analysis](index=27&type=section&id=%28II%29%20Profitability%20Analysis) Despite revenue and gross profit declines of **2.7%** and **4.2%**, effective cost control kept operating profit flat, leading to **8.1%** net profit growth, with cost of sales at **66.7%** of revenue Major Profit and Loss Item Changes | Metric (RMB in thousands) | 2020 | 2019 | Change | | :--- | :--- | :--- | :--- | | **Operating Revenue** | 20,891,454 | 21,478,831 | -2.7% | | **Gross Profit** | 6,964,665 | 7,271,722 | -4.2% | | **Operating Profit** | 4,659,112 | 4,692,516 | -0.7% | | **Profit for the Year** | 3,274,390 | 3,028,382 | 8.1% | | **Profit Attributable to Shareholders of the Company** | 3,186,993 | 2,973,104 | 7.2% | - Average coal purchase price decreased by approximately **7.9%** year-on-year, from **657.6 yuan/tonne** to **605.4 yuan/tonne**[49](index=49&type=chunk) - Due to the impact of the COVID-19 pandemic, government fiscal measures such as social security exemptions led to a decrease in labor costs, and maintenance costs also decreased, partially offsetting increases in other costs[49](index=49&type=chunk) [Financial Review](index=29&type=section&id=3.%20Financial%20Review) Financial position improved in 2020: period expenses fell from **12.5%** to **11.4%**, total liabilities decreased **17.1%**, and net capital-to-debt ratio dropped from **27.6%** to **13.9%**, with **2.19 billion yuan** reduction in borrowings [Period Expenses](index=29&type=section&id=%28a%29%20Period%20Expenses) Total period expenses as a percentage of sales revenue decreased by **1.1 percentage points** to **11.4%** in 2020, driven by lower administrative and finance expenses from reduced wages, professional fees, and interest Period Expenses Analysis | Expense Type | 2020 Amount (RMB in thousands) | Proportion of Sales Revenue | 2019 Amount (RMB in thousands) | Proportion of Sales Revenue | Change in Proportion | | :--- | :--- | :--- | :--- | :--- | :--- | | Selling Expenses | 681,168 | 3.3% | 672,945 | 3.1% | +0.2 percentage points | | Administrative Expenses | 1,358,311 | 6.5% | 1,500,670 | 7.0% | -0.5 percentage points | | Finance Expenses | 347,110 | 1.7% | 509,770 | 2.4% | -0.7 percentage points | | **Total** | **2,386,589** | **11.4%** | **2,683,385** | **12.5%** | **-1.1 percentage points** | [Statement of Financial Position Analysis](index=30&type=section&id=%28b%29%20Statement%20of%20Financial%20Position%20Item%20Changes) By 2020 year-end, total assets grew **3.2%** to **27.68 billion yuan**, total liabilities fell **17.1%** to **11.80 billion yuan**, and equity attributable to shareholders increased **25.7%** to **15.70 billion yuan**, optimizing financial structure Major Statement of Financial Position Item Changes | Item (RMB in thousands) | December 31, 2020 | December 31, 2019 | Change | | :--- | :--- | :--- | :--- | | **Total Assets** | 27,677,443 | 26,827,805 | 3.2% | | **Total Liabilities** | 11,795,426 | 14,227,366 | -17.1% | | **Equity Attributable to Equity Holders of the Company** | 15,702,798 | 12,497,200 | 25.7% | | **Net Capital-to-Debt Ratio** | 13.9% | 27.6% | -13.7 percentage points | [Loans and Borrowings](index=31&type=section&id=%28c%29%20Long-term%20and%20Short-term%20Bank%20Loans%20and%20Other%20Borrowings) Total borrowings decreased by **2.19 billion yuan** to **3.97 billion yuan** by 2020 year-end, a **35.5%** reduction, with short-term borrowings at **69.0%**, reflecting active debt structure optimization - Total borrowings decreased from **6.16 billion yuan** to **3.97 billion yuan**, a year-on-year decrease of **35.5%**[54](index=54&type=chunk) [Capital Expenditures](index=31&type=section&id=%28d%29%20Capital%20Expenditures) Capital expenditures were approximately **1.52 billion yuan**, focused on intelligent production, mine reserves, and production line upgrades; authorized and contracted capital commitments increased **135.7%** to **766 million yuan**, signaling increased future investment - Capital expenditures were approximately **1.52 billion yuan**, mainly for intelligent production, mine reserves, and production line technological upgrades[56](index=56&type=chunk) Capital Commitments (RMB in thousands) | Item | December 31, 2020 | December 31, 2019 | | :--- | :--- | :--- | | Authorized and Contracted | 765,849 | 324,888 | | Authorized but Not Contracted | 1,268,803 | 334,698 | | **Total** | **2,034,652** | **659,586** | [Cash Flow Analysis](index=32&type=section&id=%28e%29%20Net%20Cash%20Flow%20Analysis) Net operating cash inflow decreased **15.8%** to **3.51 billion yuan** due to delayed sales; investing cash outflow was **1.33 billion yuan** (**12.9%** decrease); financing cash outflow was **2.13 billion yuan** (**18.0%** decrease) from loan and bond repayments Net Cash Flow Analysis (RMB in thousands) | Item | 2020 | 2019 | | :--- | :--- | :--- | | Net Cash Generated from Operating Activities | 3,507,072 | 4,166,604 | | Net Cash Used in Investing Activities | (1,325,379) | (1,520,899) | | Net Cash Used in Financing Activities | (2,132,673) | (2,600,085) | | **Net Change in Cash and Cash Equivalents** | **49,020** | **45,620** | [2021 Outlook](index=36&type=section&id=5.%202021%20Outlook) For 2021, cement demand is expected to plateau (**-2%~0%**), with supply constrained by environmental policies; infrastructure supports demand, but real estate faces pressure, maintaining stable prices and profitability [Operating Environment Outlook](index=36&type=section&id=%28a%29%20Operating%20Environment%20Outlook) For 2021, cement demand is expected to plateau (**-2%~0%**); infrastructure investment offers strong support, but new real estate starts face downward pressure, with environmental policies compressing supply - Expected cement demand growth for 2021 is **-2% to 0%**, showing a pattern of higher in the first half and lower in the second half[68](index=68&type=chunk) - The supply side will continue to be compressed by environmental policies (peak shifting production, carbon peaking, power restrictions), which helps resolve overcapacity[70](index=70&type=chunk) [Company Business Outlook](index=38&type=section&id=%28b%29%20Company%20Business%20Outlook) In 2021, the company will focus on high-quality development through 'cement+' industrial chain extension, resource reserves, intelligent construction, quality, cost, price stability, market expansion, and brand building - Deepen the implementation of the industrial chain extension strategy, accelerate the development of the 'cement+' model, and strategically deploy in green building materials industries such as aggregates, ready-mix concrete, and prefabricated buildings[72](index=72&type=chunk) - Accelerate the promotion of intelligent construction, applying big data and smart manufacturing across the entire industrial chain to enhance management levels[74](index=74&type=chunk) - Firmly implement normalized peak shifting production, adjust marketing strategies, and strive for new historical highs in economic benefits and cement sales volume[77](index=77&type=chunk) [Directors' Report](index=42&type=section&id=%28VI%29%20Directors%27%20Report) [Major Investments](index=42&type=section&id=1.%20Major%20Investments%20During%20the%20Reporting%20Period) Major ongoing projects, including grate cooler renovation and new grinding lines, involved over **450 million yuan** investment, aiming to enhance production efficiency and environmental standards Major Investment Projects During Reporting Period | No. | Project Name | Investment During Reporting Period (RMB in thousands) | | :--- | :--- | :--- | | 1 | Grate cooler renovation projects for eleven companies | 230,662 | | 2 | Changle Shanshui 1 million tonnes/year cement grinding production line | 79,602 | | 3 | Shanghe Branch 1 million tonnes/year cement grinding production line | 42,280 | | 4 | Liaoning Gongyuan 5000 line raw meal tube mill to roller press project | 30,881 | | 5 | Anqiu Shanshui 1 million tonnes/year cement grinding production line | 21,143 | [Major Controlled Subsidiaries](index=43&type=section&id=2.%20Major%20Controlled%20Subsidiaries) The top five profit-contributing subsidiaries are all in Shandong, with Pingyin Shanshui leading with **362.44 million yuan** net profit, underscoring the region's core role in Group profitability Top 5 Subsidiaries by Profit | Company Name | Sales Amount (RMB in thousands) | Operating Profit (RMB in thousands) | Net Profit (RMB in thousands) | | :--- | :--- | :--- | :--- | | Pingyin Shanshui | 1,018,218 | 446,813 | 362,437 | | Linqu Shanshui | 914,016 | 391,021 | 280,691 | | Yantai Shanshui | 788,986 | 304,620 | 236,313 | | Anqiu Shanshui | 762,462 | 329,778 | 250,184 | | Zibo Shanshui | 911,454 | 371,361 | 256,883 | [Final Dividend](index=43&type=section&id=3.%20Final%20Dividend) Due to an ongoing winding-up petition in the Cayman Islands and complexities in obtaining a recognition order for dividend distribution, the Board decided against recommending a 2020 final dividend - Due to the winding-up petition in the Cayman Islands, the Board does not recommend a final dividend for 2020[84](index=84&type=chunk) [Share Capital and Major Shareholders](index=49&type=section&id=%28VII%29%20Share%20Capital%20and%20Major%20Shareholders%2C%20Directors%27%20Shareholdings) [Major Shareholders' Holdings](index=49&type=section&id=II.%20Major%20Shareholders%27%20Holdings) By 2020 year-end, the company's shareholding was concentrated, with Tianrui Group (**21.85%**), CSI (**19.47%**), and China National Building Material Group (**12.94%**) as major shareholders, reflecting industrial capital influence Major Shareholders' Holdings (as of December 31, 2020) | Shareholder Name | Nature of Interest | Percentage of Shareholding | | :--- | :--- | :--- | | Tianrui Group Co., Ltd. | Interest of a corporation controlled by a substantial shareholder | 21.85% | | China Shanshui Investment Company Limited | Beneficial owner | 19.47% | | China National Building Material Co., Ltd. | Interest of a corporation controlled by a substantial shareholder | 12.94% | | Cithara Global Multi-Strategy SP | Beneficial owner | 11.10% | | Asia Cement Corporation | Interest of a corporation controlled by a substantial shareholder | 9.84% | [Share Option Scheme](index=52&type=section&id=IV.%20Share%20Option%20Scheme) **115.6 million** unexercised share options (**2.66%** of issued capital) were granted in 2011 and 2015 at **HKD 7.90** and **HKD 3.68**; 2015 options are currently unenforceable due to legal disputes - As of the end of the reporting period, a total of **115,600,000** share options remained unexercised, accounting for **2.66%** of the issued share capital[122](index=122&type=chunk) - Share options granted in early 2015 were put on hold due to an injunction application filed by CSI and are currently unenforceable[120](index=120&type=chunk) [Directors, Senior Management, and Employees](index=55&type=section&id=%28VIII%29%20Directors%2C%20Senior%20Management%20and%20Employees%27%20Basic%20Information) [Biographies of Directors and Senior Management](index=55&type=section&id=%282%29%20Biographies%20of%20Directors%20and%20Senior%20Management) The Board and senior management comprise experienced professionals; Executive Directors Mr. Chang Zhangli and Ms. Wu Lingling hold key roles at China National Building Material Group and Asia Cement, while Independent Non-executive Directors provide accounting and legal expertise - Mr. Chang Zhangli, Chairman of the Board, also serves as Deputy General Manager of China National Building Material Group and a director of several listed companies, with nearly **30 years** of experience in listed company management[128](index=128&type=chunk) - Ms. Wu Lingling, Executive Director, is the CFO and Executive Vice General Manager of Asia Cement Corporation, with over **30 years** of experience in international financial accounting[129](index=129&type=chunk) [Human Resources](index=62&type=section&id=7.%20Human%20Resources) As of 2020 year-end, the Group had **18,409 employees**, providing competitive remuneration and welfare plans compliant with Chinese laws, including retirement, medical, unemployment, and housing provident fund - As of December 31, 2020, the Group had a total of **18,409** employees[142](index=142&type=chunk) [Corporate Governance Report](index=63&type=section&id=%28IX%29%20Corporate%20Governance%20Report) [Corporate Governance Structure](index=63&type=section&id=Chairman%20and%20Chief%20Executive%20Officer) The company largely complied with the Corporate Governance Code, but deviated by combining Chairman and CEO roles under Mr. Chang Zhangli for efficiency, and the Chairman did not meet separately with Independent Non-executive Directors - The company did not separate the roles of Chairman and Chief Executive Officer, with Mr. Chang Zhangli holding both, deviating from Corporate Governance Code provision A.2.1[144](index=144&type=chunk) - During the reporting period, the Chairman did not hold meetings with Independent Non-executive Directors without the presence of other directors, deviating from Code provision A.2.7[145](index=145&type=chunk) [Board Committees](index=71&type=section&id=Board%20Committees) The company established Audit, Remuneration, Nomination, and Executive Committees; Audit and Remuneration Committees comprise three Independent Non-executive Directors, while Nomination has two Executive and three Independent Non-executive Directors, all fulfilling oversight duties - The Audit Committee is composed of three Independent Non-executive Directors and held **5** meetings during the reporting period[159](index=159&type=chunk)[160](index=160&type=chunk) - The Remuneration Committee is composed of three Independent Non-executive Directors and held **4** meetings during the reporting period[161](index=161&type=chunk)[162](index=162&type=chunk) - The Nomination Committee is composed of five directors (including three Independent Non-executive Directors) and held **1** meeting during the reporting period[163](index=163&type=chunk)[164](index=164&type=chunk) [Risk Management and Internal Control](index=77&type=section&id=Risk%20Management%20and%20Internal%20Control%20Systems%20for%20Operations) The Board is responsible for the Group's risk management and internal control systems, covering eight key areas, and deemed them effective and adequate after annual review with the Audit Committee and management - The Group has established a relatively sound internal control system, covering eight main aspects including production, finance, procurement, and sales[170](index=170&type=chunk)[171](index=171&type=chunk)[172](index=172&type=chunk) - The Board has conducted an annual review of the risk management and internal control systems for the reporting period and deemed them effective and adequate[173](index=173&type=chunk) [Significant Matters](index=84&type=section&id=%28X%29%20Significant%20Matters) [Major Litigation in Cayman Islands](index=84&type=section&id=1.%20Major%20Litigation%20in%20Cayman%20Islands) The company faces significant legal risk from an ongoing winding-up petition in the Cayman Islands filed by Tianrui (International) Holding, with China National Building Material Group and Asia Cement as respondents, creating operational uncertainty - Shareholder Tianrui (International) Holding Company Limited filed a petition with the Grand Court of the Cayman Islands for the winding-up of the company[185](index=185&type=chunk) - Tianrui also issued a writ of summons seeking a declaration to revoke certain convertible bonds issued by the company in 2018 and their subsequent conversion[187](index=187&type=chunk) - The Grand Court has ordered China National Building Material Group and Asia Cement to be joined as respondents to the winding-up petition[188](index=188&type=chunk) [Major Litigation in Hong Kong](index=86&type=section&id=2.%20Major%20Litigation%20in%20Hong%20Kong) The company filed lawsuits in Hong Kong against former directors for alleged breach of fiduciary duties and misconduct, and against Tianrui International for alleged conspiracy to gain control, with protracted trials scheduled for 2021 - The company filed lawsuits against former directors Zhang Caiqu and Zhang Bin, among others, claiming damages arising from their alleged misconduct[190](index=190&type=chunk) - The company filed lawsuits against Tianrui International, Tianrui Group, and others, alleging conspiracy through illegal means with the intent to harm the plaintiff to gain control[197](index=197&type=chunk) [Major Litigation in China](index=90&type=section&id=3.%20Major%20Litigation%20in%20China) Core subsidiary Shandong Shanshui has **101** unresolved litigation cases in mainland China, with **54** as defendant, involving approximately **443 million yuan** in claims, primarily for labor, sales, and equity disputes - Shandong Shanshui has **101** unresolved litigation cases, with **54** as defendant, involving claims of approximately **443 million yuan**[199](index=199&type=chunk)[200](index=200&type=chunk) [Independent Auditor's Report](index=92&type=section&id=%28XI%29%20Independent%20Auditor%27s%20Report) [Audit Opinion](index=92&type=section&id=Opinion) The auditor issued a standard unqualified opinion on the 2020 consolidated financial statements, affirming they fairly reflect the Group's financial position, performance, and cash flows, prepared in accordance with relevant accounting standards - The auditor believes that the consolidated financial statements fairly and accurately reflect the Group's consolidated financial position as of December 31, 2020, and its consolidated financial performance and consolidated cash flows for the year then ended, in accordance with International Financial Reporting Standards[206](index=206&type=chunk) [Key Audit Matters](index=93&type=section&id=Key%20Audit%20Matters) Three key audit matters were identified, involving significant management judgment: 1) impairment assessment of property, plant and equipment, right-of-use assets, and intangible assets; 2) expected credit losses for receivables; and 3) valuation of convertible bonds - Key Audit Matter One: Impairment assessment of property, plant and equipment, right-of-use assets, and intangible assets, due to significant judgments involved regarding future cash flows and discount rates[209](index=209&type=chunk) - Key Audit Matter Two: Assessment of loss allowance for expected credit losses on trade and bills receivables and other receivables, due to high estimation uncertainty involved[210](index=210&type=chunk) - Key Audit Matter Three: Valuation of convertible bonds, as the determination of the fair value of their derivative component involves complex parameters and significant management judgment[211](index=211&type=chunk) [Consolidated Financial Statements](index=99&type=section&id=%28XII%29%20Consolidated%20Financial%20Statements) [Consolidated Income Statement](index=99&type=section&id=%28XII%29%20Consolidated%20Financial%20Statements) The detailed consolidated income statement shows 2020 operating revenue of **20.89 billion yuan**, profit before tax of **4.33 billion yuan**, and annual net profit of **3.27 billion yuan**, demonstrating profit growth despite revenue decline through cost control 2020 Consolidated Income Statement | Item (RMB in thousands) | 2020 | 2019 | | :--- | :--- | :--- | | **Operating Revenue** | 20,891,454 | 21,478,831 | | **Gross Profit** | 6,964,665 | 7,271,722 | | **Operating Income** | 4,659,112 | 4,692,516 | | **Profit Before Tax** | 4,333,590 | 4,225,988 | | **Profit for the Year** | 3,274,390 | 3,028,382 | | **Equity Attributable to Shareholders of the Company** | 3,186,993 | 2,973,104 | | **Basic Earnings Per Share (Yuan)** | 0.73 | 0.68 | [Consolidated Statement of Financial Position](index=101&type=section&id=%28XIV%29%20Consolidated%20Statement%20of%20Financial%20Position) By 2020 year-end, total assets were **27.68 billion yuan** (non-current: **20.50 billion yuan**), total liabilities **11.80 billion yuan** (current: **9.84 billion yuan**), and net assets **15.88 billion yuan**, reflecting a robust financial structure 2020 Consolidated Statement of Financial Position | Item (RMB in thousands) | December 31, 2020 | December 31, 2019 | | :--- | :--- | :--- | | **Non-current Assets** | 20,499,061 | 20,610,663 | | **Current Assets** | 7,178,382 | 6,217,142 | | **Total Assets** | **27,677,443** | **26,827,805** | | **Current Liabilities** | 9,839,495 | 11,181,736 | | **Non-current Liabilities** | 1,955,931 | 3,045,630 | | **Total Liabilities** | **11,795,426** | **14,227,366** | | **Net Assets** | **15,882,017** | **12,600,439** | [Consolidated Cash Flow Statement](index=104&type=section&id=%28XVI%29%20Consolidated%20Cash%20Flow%20Statement) Net operating cash inflow was **3.51 billion yuan** in 2020, driven by **4.33 billion yuan** profit before tax; investing activities used **1.33 billion yuan** for fixed assets, and financing activities used **2.13 billion yuan** for loan and bond repayments 2020 Consolidated Cash Flow Statement | Item (RMB in thousands) | 2020 | 2019 | | :--- | :--- | :--- | | **Net Cash Generated from Operating Activities** | 3,507,072 | 4,166,604 | | **Net Cash Used in Investing Activities** | (1,325,379) | (1,520,899) | | **Net Cash Used in Financing Activities** | (2,132,673) | (2,600,085) | | **Net Change in Cash and Cash Equivalents** | 49,020 | 45,620 | | **Cash and Cash Equivalents at Year-end** | 1,401,233 | 1,364,054 |

CHINA SHANSHUI CEMENT GROUP LIMITED 中國山 水 水 泥 集 團 有 限 公 司 ( 於 開 曼 群 島 註 冊 成 立 的 有 限 公 司 ) SUNNSY 股份代號：691 2020 中期報告 the world and and | --- | --- | --- | |-------|------------------------------------|-------| | | | | | 目 | 錄 | | | | | | | (I) | 釋義 | 2 | | (II) | 公司信息 | 4 | | (III) | 主要數據 | 6 | | (IV) | 管理層討論與分析 | 7 | | (V) | 股本及主要股東·董事持股情況 . | 25 | | (VI) | 重要事項 | 31 | | (VII) | 中期財務報告(未經審核) (VIII) 其他 | 38 | 中 國 山 水 水 泥 集 團 有 限 公 司 • 2 0 2 0 中 期 報 告 1 (I) 釋 義 於本中期報告內，除非文義另有所指，否則下列字句具有以下涵義： | --- | --- | --- ...

SUNNSY CHINA SHANSHUI CEMENT GROUP LIMITED 中國山 水 水 泥 集 團 有 限 公 司 ( 於 開 曼 群 島 註 冊 成 立 的 有限 公 司 ) 股份代號：691 2019 年報 Comment Comment 目 錄 | --- | --- | --- | |-------|-----------------------------------------------------------------|-------| | | | | | (I) | 釋義 . | 2 | | (II) | 公司信息 | 4 | | (III) | 財務及業務數據摘要 | 6 | | (IV) | 公司概况 | 8 | | (V) | 管理層研討與分析 | 19 | | (VI) | 董事會報告 . | 41 | | (VII) | 股本及主要股東、董事持股情況 . | 49 | | | (VIII) 董事·高級管理層及員工基本資料 | 55 | | (IX) | 企業管治報告 . | 63 | | (X) | 重要事項 . | 84 | | (XI) | 獨立核數師報告 | ...

[Definitions](index=2&type=section&id=(I)%20Definitions) [Company Information](index=5&type=section&id=(II)%20Company%20Information) [Board of Directors and Board Committees](index=5&type=section&id=II.1%20Board%20of%20Directors%20and%20Board%20Committees) The report details the composition of the company's Board of Directors and its professional committees, including executive and independent non-executive directors and their key roles in audit, remuneration, and nomination committees - The company's Board of Directors comprises executive and independent non-executive directors, with Mr. Chang Zhangli as Chairman, and includes Audit, Remuneration, Executive, and Nomination Committees with clearly defined chairpersons and members[4](index=4&type=chunk) [Company Particulars](index=6&type=section&id=II.2%20Company%20Particulars) This section provides core registration and operational information, including the company's legal names, registered office, principal place of business, official website, listing exchange (HKEX stock code 00691), and auditor - China Shanshui Cement Group Limited is registered in the Cayman Islands and listed on The Stock Exchange of Hong Kong with stock code 00691[5](index=5&type=chunk) - The company's auditor is UHY CPA Limited[5](index=5&type=chunk) [Key Data](index=7&type=section&id=(III)%20Key%20Data) [Key Financial Data](index=7&type=section&id=III.1%20Key%20Financial%20Data) During the reporting period, the company demonstrated strong financial performance with revenue growing by nearly 40% and profit attributable to equity holders increasing by 59.1%, alongside an optimized debt structure with net gearing ratio decreasing from 42.6% to 36.5% Key Financial Data for H1 2019 (Compared to H1 2018) | Metric | Jan-Jun 2019 | Jan-Jun 2018 | Y-o-Y Change | | :--- | :--- | :--- | :--- | | Revenue (RMB thousands) | 9,440,723 | 6,759,414 | +39.7% | | Gross Profit (RMB thousands) | 3,281,588 | 2,384,095 | +37.6% | | Net Profit (RMB thousands) | 1,205,641 | 711,107 | +69.5% | | Profit Attributable to Equity Holders (RMB thousands) | 1,196,369 | 751,766 | +59.1% | | Basic Earnings Per Share (RMB) | 0.27 | 0.22 | +22.7% | Key Balance Sheet Metrics (Compared to End of 2018) | Metric | Jun 30, 2019 | Dec 31, 2018 | Change | | :--- | :--- | :--- | :--- | | Total Assets (RMB thousands) | 26,825,434 | 26,072,713 | +2.9% | | Total Liabilities (RMB thousands) | 16,051,184 | 16,486,377 | -2.6% | | Net Gearing Ratio | 36.5% | 42.6% | -6.1 percentage points | [Key Business Data](index=7&type=section&id=III.2%20Key%20Business%20Data) In H1 2019, the company achieved growth in both sales volume and average selling price for its main products, with cement sales volume increasing by 34.1% and ASP by 12.3%, and concrete sales volume growing by 19.5% and ASP by 13.6%, demonstrating a positive trend of both volume and price increases Key Business Data for H1 2019 (Compared to H1 2018) | Product | Metric | Jan-Jun 2019 | Jan-Jun 2018 | Y-o-Y Change | | :--- | :--- | :--- | :--- | :--- | | Cement | Sales Volume (thousand tons) | 20,373 | 15,196 | +34.1% | | | Average Selling Price (RMB/ton) | 371.4 | 330.7 | +12.3% | | Clinker | Sales Volume (thousand tons) | 3,559 | 3,530 | +0.8% | | | Average Selling Price (RMB/ton) | 276.4 | 263.2 | +5.0% | | Concrete | Sales Volume (thousand cubic meters) | 1,504 | 1,259 | +19.5% | | | Average Selling Price (RMB/cubic meter) | 499.0 | 439.1 | +13.6% | [Management Discussion and Analysis](index=8&type=section&id=(IV)%20Management%20Discussion%20and%20Analysis) [Operating Environment and Industry Overview](index=8&type=section&id=IV.1%20Operating%20Environment%20and%20Industry%20Overview) In H1 2019, China's economy remained stable with steady growth in fixed asset investment, infrastructure, and real estate, providing a favorable demand environment for the cement industry, which saw a nearly 29.6% increase in cumulative profit - In H1 2019, China's GDP grew by **6.3%** year-on-year, fixed asset investment by **5.8%**, and real estate development investment by **10.9%**, supporting cement demand[9](index=9&type=chunk) - China's cement industry achieved a cumulative profit of **RMB 82.6 billion**, a year-on-year increase of approximately **29.6%**, indicating high industry prosperity[9](index=9&type=chunk) [Company Business Review](index=8&type=section&id=IV.2%20Company%20Business%20Review) In H1 2019, the Group achieved revenue of **RMB 9.44 billion**, up **39.7%** year-on-year, and profit of **RMB 1.21 billion**, up **69.5%**, driven by increased sales volume and prices across cement, clinker, and concrete products, with stable cement production capacity of **100 million tons** H1 2019 Performance Overview | Metric | Jan-Jun 2019 | Y-o-Y Growth | | :--- | :--- | :--- | | Revenue (RMB thousands) | 9,440,723 | 39.7% | | Profit for the Period (RMB thousands) | 1,205,641 | 69.5% | | Total Sales Volume of Cement and Clinker (ten thousand tons) | 2,393.2 | 27.8% | | Sales Volume of Commercial Concrete (ten thousand cubic meters) | 150.4 | 19.5% | [Business Analysis](index=9&type=section&id=IV.2.1%20Business%20Analysis) Cement remains the core revenue driver, accounting for **79.7%** of total revenue with a **47.2%** year-on-year increase, while all major operating regions recorded significant sales growth, particularly Shanxi and Xinjiang, and high-grade cement sales volume increased by **44.1%**, indicating product structure optimization Revenue and Y-o-Y Change by Product | Product | Sales Amount (RMB thousands) | Revenue Proportion | Y-o-Y Change | | :--- | :--- | :--- | :--- | | Cement | 7,522,147 | 79.7% | +47.2% | | Clinker | 977,265 | 10.4% | +3.5% | | Concrete | 745,832 | 7.9% | +32.8% | Sales Amount and Y-o-Y Change by Operating Region | Operating Region | Sales Amount (RMB thousands) | Y-o-Y Change | | :--- | :--- | :--- | | Shandong Region | 6,599,659 | +34.7% | | Northeast Operating Region | 1,428,488 | +27.8% | | Shanxi Operating Region | 1,042,495 | +90.6% | | Xinjiang Operating Region | 370,081 | +89.6% | - Sales volume of high-grade cement reached **16.47 million tons**, a year-on-year increase of **44.1%**, accounting for **80.84%** of total cement sales, indicating a clear trend of product structure optimization[16](index=16&type=chunk) [Profitability Analysis](index=14&type=section&id=IV.2.2%20Profitability%20Analysis) The company's profitability significantly improved during the period, with gross profit, operating profit, and profit for the period all growing by over **30%** due to increased sales volume and prices, while total cost of sales as a percentage of revenue slightly increased to **65.3%** mainly due to higher raw material costs, partially offset by cost savings from waste heat power generation Changes in Key Income Statement Items | Item (RMB thousands) | Jan-Jun 2019 | Jan-Jun 2018 | Change | | :--- | :--- | :--- | :--- | | Revenue | 9,440,723 | 6,759,414 | +39.7% | | Gross Profit | 3,281,588 | 2,384,095 | +37.6% | | Operating Profit | 1,938,564 | 1,455,252 | +33.2% | | Profit for the Period | 1,205,641 | 711,107 | +69.5% | - Total cost of sales accounted for **65.3%** of revenue, a year-on-year increase of **0.6 percentage points**, with raw material costs rising by **5.6 percentage points** and coal purchase price increasing by **6.1%** year-on-year[22](index=22&type=chunk) - In H1 2019, total waste heat power generation was **555 million kWh**, reducing clinker costs by approximately **RMB 191 million**[22](index=22&type=chunk) [Company Financial Review](index=16&type=section&id=IV.3%20Company%20Financial%20Review) The company's financial position is robust, with optimized period expenses and significantly reduced finance costs due to debt negotiation and accelerated repayment, while the balance sheet shows a slight increase in total assets, a decrease in total liabilities, and a net gearing ratio reduction from 42.6% to 36.5%, with operating cash flow increasing and cash and equivalents significantly higher at period-end - Finance costs as a percentage of sales revenue decreased from **5.9%** to **2.6%**, primarily due to reduced interest expenses[24](index=24&type=chunk)[25](index=25&type=chunk) - The net gearing ratio was **36.5%**, a decrease of **6.1 percentage points** from the end of last year, indicating reduced financial leverage[27](index=27&type=chunk) Net Cash Flow Analysis (RMB thousands) | Item | Jan-Jun 2019 | Jan-Jun 2018 | | :--- | :--- | :--- | | Net Cash Flow from Operating Activities | 1,642,319 | 1,270,779 | | Net Cash Flow Used in Investing Activities | (758,195) | (177,818) | | Net Cash Flow Used in Financing Activities | (830,036) | (1,011,044) | | Cash and Equivalents at Period End | 1,355,798 | 389,499 | - Capital expenditure during the reporting period was approximately **RMB 616 million**, primarily for investments in cement and clinker production lines[29](index=29&type=chunk) [Outlook for H2](index=20&type=section&id=IV.4%20Outlook%20for%20H2) For H2 2019, the company anticipates healthy cement demand driven by infrastructure and real estate investment, with supply-side reforms, environmental production restrictions, and staggered production continuing to promote high-quality industry development, while the company aims to achieve its best-ever economic performance by accelerating new and old kinetic energy conversion and implementing three key strategies: resource reserves, industrial chain extension, and talent development [Outlook for Macro Operating Environment in H2](index=20&type=section&id=IV.4.1%20Outlook%20for%20Macro%20Operating%20Environment%20in%20H2) In H2, real estate investment growth is expected to slow, but accelerated infrastructure project deployment should support overall positive cement demand growth for the year, while supply will remain constrained by staggered production and environmental policies, and the new national standard eliminating low-grade cement (PC32.5R) is expected to benefit companies with a higher proportion of high-grade cement - Demand side: Real estate investment growth is expected to slow in H2, but accelerated infrastructure project deployment could lead to positive full-year cement production growth[37](index=37&type=chunk) - Supply side: "De-capacity" remains the industry's main theme, with staggered production and environmental restrictions continuing as key means to promote supply-side reform[39](index=39&type=chunk) - Policy impact: The new national standard, effective October 1, 2019, abolishing PC32.5R composite Portland cement, is expected to increase clinker consumption and benefit the company's product structure, which is primarily high-grade cement[40](index=40&type=chunk) [Outlook for Company Business in H2](index=23&type=section&id=IV.4.2%20Outlook%20for%20Company%20Business%20in%20H2) In H2, the company will focus on maximizing economic efficiency, implementing "resource reserves, industrial chain extension, and talent development" strategies, and enhancing operational quality, strengthening raw material supply, promoting energy conservation and green mining, and improving talent development and incentive mechanisms for high-quality growth - The company's core objective for H2 is to achieve "the best economic performance in history"[42](index=42&type=chunk) - Three major strategies: Implement "resource reserves, industrial chain extension, and talent development" strategies to accelerate the conversion of old and new growth drivers[42](index=42&type=chunk) - Key initiatives include enhancing marketing strategy precision, consolidating raw material supply, promoting green mine construction, vigorously developing the aggregate industry, and strengthening talent incentives[42](index=42&type=chunk) [Recent Developments](index=24&type=section&id=IV.5%20Recent%20Developments) On June 4, 2019, the company received a writ of summons from shareholder Tianrui Group, seeking to revoke certain convertible bonds issued in 2018 and their subsequent conversion, which the company believes lacks reasonable grounds and will actively defend against - In June 2019, the company received a lawsuit initiated by shareholder Tianrui Group, seeking to revoke the convertible bonds issued by the company in 2018 and the related share allotments, which the company will actively defend against[44](index=44&type=chunk) [Employees and Remuneration](index=24&type=section&id=IV.6%20Employees%20and%20Remuneration) As of June 30, 2019, the Group had **18,556** employees, with total remuneration for the reporting period amounting to **RMB 1.092 billion** Employee and Remuneration Information | Item | Data | | :--- | :--- | | Number of Employees (as of Jun 30, 2019) | 18,556 people | | Total Remuneration for the Period (RMB) | 1,091,585,000 | [Share Capital and Major Shareholders', Directors' Shareholdings](index=25&type=section&id=(V)%20Share%20Capital%20and%20Major%20Shareholders%27%2C%20Directors%27%20Shareholdings) [Changes in Share Capital and Listing Status](index=25&type=section&id=V.1%20Changes%20in%20Share%20Capital%20and%20Listing%20Status) As of June 30, 2019, the company's authorized share capital was **USD 100 million**, divided into **10 billion shares**, with **4,353,966,228** shares issued, and no new shares were issued during the reporting period Share Capital Structure (as of Jun 30, 2019) | Item | Quantity | | :--- | :--- | | Authorized Share Capital | 10,000,000,000 shares | | Issued Shares | 4,353,966,228 shares | [Major Shareholders' Shareholdings](index=26&type=section&id=V.2%20Major%20Shareholders%27%20Shareholdings) As of June 30, 2019, major shareholders included Tianrui Group (**21.85%**), China Shanshui Investment Company Limited (**19.47%**), Asia Cement Corporation (significant aggregate interest), and China National Building Material Company Limited (**12.94%**), with no disclosable share interests held by directors or chief executives at period-end Major Shareholders' Shareholdings (as of Jun 30, 2019) | Shareholder Name | Shareholding Percentage | | :--- | :--- | | Tianrui Group (controlled by Li Liufa, Li Fengluan) | 21.85% | | China Shanshui Investment Company Limited | 19.47% | | China National Building Material Company Limited | 12.94% | | Asia Cement Corporation | 9.84% (and other interests) | - As of the end of the reporting period, no directors or chief executives of the company had any interests or short positions in shares, underlying shares, or debentures required to be disclosed under the Securities and Futures Ordinance[51](index=51&type=chunk) [Share Option Scheme](index=28&type=section&id=V.3%20Share%20Option%20Scheme) The company adopted a share option scheme in 2008, with two batches of options granted in 2011 and 2015, of which **207.3 million** options granted in 2015 were put on hold due to legal proceedings, and the unutilized scheme authorization limit was **45.736 million shares** as of June 30, 2019 - The company granted share options on May 25, 2011, and January 27, 2015[52](index=52&type=chunk) - **207.3 million** share options granted in 2015 were put on hold due to an injunction application filed by CSI[53](index=53&type=chunk) - As of June 30, 2019, the full exercise of granted share options would result in the issuance of **214.6 million shares**, representing approximately **4.93%** of the issued share capital[58](index=58&type=chunk) [Significant Matters](index=32&type=section&id=(VI)%20Significant%20Matters) [Connected Transactions](index=32&type=section&id=VI.1%20Connected%20Transactions) During the reporting period, the company engaged in connected transactions with major shareholder Tianrui Group, including providing a company guarantee for Tianrui Group's **RMB 400 million** loan and receiving cumulative interest-free loans of **RMB 1.613 billion** from Tianrui Group for debt repayment, with **RMB 884 million** remaining outstanding at period-end - In 2016, the company provided a corporate guarantee for a **RMB 400 million** loan to its major shareholder, Tianrui Group[61](index=61&type=chunk) - As of June 30, 2019, the Group had cumulatively received **RMB 1.613 billion** in interest-free loans from Tianrui Group for debt repayment, of which **RMB 884 million** remained outstanding[62](index=62&type=chunk)[63](index=63&type=chunk) [Major Litigation](index=33&type=section&id=VI.2%20Major%20Litigation) The company is involved in multiple major lawsuits across the Cayman Islands, Hong Kong, and mainland China, primarily concerning a winding-up petition filed by shareholder Tianrui Group, disputes with former directors and management, and various contract and labor disputes in mainland China [Major Litigation in the Cayman Islands](index=33&type=section&id=VI.2.1%20Major%20Litigation%20in%20the%20Cayman%20Islands) Shareholder Tianrui filed a winding-up petition against the company in the Grand Court of the Cayman Islands in August 2018, which was initially withdrawn but later reinstated by the Court of Appeal in January 2019, remitting the case for re-hearing, and the company has applied for leave to appeal to the Privy Council - Shareholder Tianrui (International) Holding Company Limited filed a winding-up petition against the company in the Cayman Islands court, and the case has been remitted for re-hearing by the Cayman Islands court[64](index=64&type=chunk)[65](index=65&type=chunk) [Major Litigation in Hong Kong](index=34&type=section&id=VI.2.2%20Major%20Litigation%20in%20Hong%20Kong) The company is involved in multiple lawsuits in Hong Kong, including claims against former directors Zhang Caiqu and Zhang Bin for alleged misconduct, litigation against former senior management, and a conspiracy claim against Tianrui Group and its affiliates for unlawful means, with some cases scheduled for trial in 2021 - The company filed lawsuits against former directors Zhang Caiqu and Zhang Bin, claiming damages for alleged misconduct, and has obtained an asset freezing order against them, with the case scheduled for trial in April 2021[67](index=67&type=chunk)[70](index=70&type=chunk)[71](index=71&type=chunk) - The company filed a lawsuit against Tianrui Group and its affiliates, alleging conspiracy by unlawful means with the intent to harm the plaintiff and gain control of the company[75](index=75&type=chunk) [Litigation in China](index=39&type=section&id=VI.2.3%20Litigation%20in%20China) As of the report date, subsidiary Shandong Shanshui had **101** pending cases in mainland China, with **54** cases as defendant involving approximately **RMB 443 million** primarily for labor disputes, and **46** cases as plaintiff involving approximately **RMB 24.17 million**, also primarily for labor disputes Shandong Shanshui Pending Litigation Status | Litigation Status | Number of Cases | Claim Amount (approx. RMB) | | :--- | :--- | :--- | | Defendant | 54 cases | 443 million | | Plaintiff | 46 cases | 24.17 million | | Third Party | 1 case | - | [Interim Financial Report (Unaudited)](index=40&type=section&id=(VII)%20Interim%20Financial%20Report%20(Unaudited)) [Condensed Consolidated Statement of Profit or Loss and Other Comprehensive Income](index=40&type=section&id=VII.1%20Condensed%20Consolidated%20Statement%20of%20Profit%20or%20Loss%20and%20Other%20Comprehensive%20Income) For the six months ended June 30, 2019, the company achieved operating revenue of **RMB 9.44 billion**, up **39.7%** year-on-year, gross profit of **RMB 3.28 billion**, up **37.6%**, and profit for the period of **RMB 1.21 billion**, a significant increase of **69.5%** from **RMB 711 million** in the prior year, with basic earnings per share of **RMB 0.27** Condensed Consolidated Statement of Profit or Loss Summary (RMB thousands) | Item | Jan-Jun 2019 | Jan-Jun 2018 | | :--- | :--- | :--- | | Operating Revenue | 9,440,723 | 6,759,414 | | Gross Profit | 3,281,588 | 2,384,095 | | Operating Profit | 1,938,564 | 1,455,252 | | Profit Before Tax | 1,713,947 | 1,063,308 | | Profit for the Period | 1,205,641 | 711,107 | [Condensed Consolidated Statement of Financial Position](index=42&type=section&id=VII.2%20Condensed%20Consolidated%20Statement%20of%20Financial%20Position) As of June 30, 2019, the company's total assets were **RMB 26.83 billion**, total liabilities were **RMB 16.05 billion**, and net assets were **RMB 10.77 billion**, with a significant net current liability of **RMB 5.21 billion** indicating substantial short-term repayment pressure and a material uncertainty regarding going concern Condensed Consolidated Statement of Financial Position Summary (RMB thousands) | Item | Jun 30, 2019 | Dec 31, 2018 | | :--- | :--- | :--- | | Total Assets | 26,825,434 | 26,072,713 | | Total Liabilities | 16,051,184 | 16,486,377 | | Net Current Liabilities | (5,211,416) | (7,370,128) | | Net Assets | 10,774,250 | 9,586,336 | [Condensed Consolidated Statement of Changes in Equity](index=44&type=section&id=VII.3%20Condensed%20Consolidated%20Statement%20of%20Changes%20in%20Equity) As of June 30, 2019, the company's total equity increased to **RMB 10.77 billion** from **RMB 9.59 billion** at the beginning of the year, primarily driven by the **RMB 1.21 billion** net profit recorded for the period - Total comprehensive income for the period was **RMB 1.204 billion**, which was the primary reason for the increase in equity[86](index=86&type=chunk) [Condensed Consolidated Statement of Cash Flows](index=45&type=section&id=VII.4%20Condensed%20Consolidated%20Statement%20of%20Cash%20Flows) During the reporting period, net cash generated from operating activities was **RMB 1.64 billion**, an increase of **RMB 370 million** year-on-year, indicating stronger core business cash generation, while net cash used in investing activities was **RMB 760 million** mainly for long-term asset purchases, and net cash used in financing activities was **RMB 830 million** primarily for loan repayments, with cash and cash equivalents at period-end totaling **RMB 1.36 billion** Condensed Consolidated Statement of Cash Flows Summary (RMB thousands) | Item | Jan-Jun 2019 | Jan-Jun 2018 | | :--- | :--- | :--- | | Net Cash from Operating Activities | 1,642,319 | 1,270,779 | | Net Cash Used in Investing Activities | (758,195) | (177,818) | | Net Cash Used in Financing Activities | (830,036) | (1,011,044) | | Cash and Cash Equivalents at Period End | 1,355,798 | 389,499 | [Notes to the Condensed Consolidated Financial Statements](index=46&type=section&id=VII.5%20Notes%20to%20the%20Condensed%20Consolidated%20Financial%20Statements) The notes to the financial statements highlight key accounting policies and significant matters, including a "material uncertainty regarding going concern" due to net current liabilities of **RMB 5.21 billion**, the impact of adopting IFRS 16 "Leases", and detailed disclosures on various borrowings, bonds, their overdue and restructuring status, related party transactions, and contingent liabilities from litigation - A material uncertainty regarding going concern exists: as of June 30, 2019, the Group's current liabilities exceeded current assets by **RMB 5.21 billion**, with **RMB 4.09 billion** in interest-bearing borrowings due within 12 months[89](index=89&type=chunk) - The company first adopted IFRS 16 "Leases" during the period, recognizing right-of-use assets of **RMB 2.30 billion** and lease liabilities of **RMB 88 million** as of January 1, 2019[97](index=97&type=chunk)[111](index=111&type=chunk) - Some of the company's short-term financing bills and medium-term notes had previously defaulted, but agreements were subsequently reached with holders to adjust repayment terms, and interest on some debts was waived[159](index=159&type=chunk)[164](index=164&type=chunk)[165](index=165&type=chunk) [Others](index=88&type=section&id=(VIII)%20Others) [Interim Dividend](index=88&type=section&id=VIII.1%20Interim%20Dividend) The Board of Directors decided not to declare an interim dividend for the six-month period ended June 30, 2019 - The company will not declare an interim dividend for 2019[202](index=202&type=chunk) [Corporate Governance](index=88&type=section&id=VIII.2%20Corporate%20Governance) The company is committed to maintaining high standards of corporate governance and has adopted the HKEX Listing Rules' Corporate Governance Code, complying with all provisions during the reporting period except for the combined roles of Chairman and Chief Executive Officer held by Mr. Chang Zhangli, and the Audit Committee has reviewed this interim results report - The company complies with the Corporate Governance Code, with one deviation: the roles of Chairman and Chief Executive Officer are combined and held by Mr. Chang Zhangli[203](index=203&type=chunk)[204](index=204&type=chunk) - The Audit Committee, comprising three independent non-executive directors, has reviewed these interim results and report[206](index=206&type=chunk)

SUNNSY CHINA SHANSHUI CEMENT GROUP LIMITED 中 國 山 水 水 泥 集 團 有 限 公 司 ( 於 開 曼 群 島 註 冊 成 立 的 有 限 公 司 ) 股份代號：691 2018 年報 the world and a works 錄 釋義 . (I) 2 公司信息 (II) 4 財務及業務數據摘要. (III) 6 公司概况 (IV) 8 (V) 管理層研討與分析 19 (VI) 董事會報告 . 40 股本及主要股東·董事持股情況 . (VII) 47 (VIII) 董事·高級管理層及員工基本資料 54 企業管治報告 . (IX) 65 重要事項 (X) 89 (XI) 獨立核數師報告 105 (XII) 綜合損益表 . 116 (XIII) 綜合損益及其他綜合收益表 ... 117 (XIV) 綜合資產負債表 118 (XV) 綜合權益變動表 . . 120 (XVI) 綜合現金流量表 . 121 (XVII) 綜合財務報表附註. 123 中 國 山 水 水 泥 集 團 有 限 公 司 • 2 0 1 8 年 報 1 (I) 釋 義 「本公司」或「公司」或 「中 ...