[Financial Statements](index=3&type=section&id=Financial%20Statements) [Consolidated Statement of Profit or Loss and Other Comprehensive Income](index=3&type=section&id=Consolidated%20Statement%20of%20Profit%20or%20Loss%20and%20Other%20Comprehensive%20Income) In H1 2024, revenue slightly decreased by 2.9%, but a significant drop in cost of sales led to a 189.4% surge in gross profit, achieving a net profit of RMB 267.48 million and a positive basic EPS, reversing prior period losses Key Consolidated Statement of Profit or Loss Data (For the six months ended June 30) | Indicator | H1 2024 (RMB thousands) | H1 2023 (RMB thousands) | Year-on-year Change | | :--- | :--- | :--- | :--- | | **Revenue** | 5,645,514 | 5,814,323 | -2.9% | | **Gross Profit** | 507,180 | 175,247 | +189.4% | | **Operating Profit/(Loss)** | 342,483 | (45,735) | Turned profitable | | **Profit/(Loss) for the period** | 267,482 | (28,959) | Turned profitable | | **Profit/(Loss) attributable to owners of the Company** | 214,659 | (37,754) | Turned profitable | | **Basic EPS** | 0.0360 RMB | (0.0063) RMB | Turned profitable | [Consolidated Statement of Financial Position](index=4&type=section&id=Consolidated%20Statement%20of%20Financial%20Position) As of June 30, 2024, total assets slightly increased to RMB 5.44 billion, while total liabilities decreased to RMB 1.29 billion due to reduced borrowings, optimizing the balance sheet structure with total equity rising to RMB 4.15 billion Key Consolidated Statement of Financial Position Data | Indicator | June 30, 2024 (RMB thousands) | December 31, 2023 (RMB thousands) | Change | | :--- | :--- | :--- | :--- | | **Total Assets** | 5,439,704 | 5,352,626 | +1.6% | | Non-current Assets | 2,549,859 | 2,655,002 | -4.0% | | Current Assets | 2,889,845 | 2,697,624 | +7.1% | | **Total Liabilities** | 1,290,656 | 1,416,073 | -8.9% | | Current Liabilities | 1,022,749 | 1,192,374 | -14.2% | | **Total Equity** | 4,149,048 | 3,936,553 | +5.4% | | **Cash and Cash Equivalents** | 1,094,537 | 899,830 | +21.6% | [Consolidated Statement of Changes in Equity](index=6&type=section&id=Consolidated%20Statement%20of%20Changes%20in%20Equity) As of June 30, 2024, total equity increased to RMB 4.15 billion, primarily driven by a net profit of RMB 267.48 million for the period, partially offset by RMB 37.56 million in dividends paid and RMB 0.55 million from share repurchases - Beginning total equity was **RMB 3.937 billion**, with profit for the period increasing it by **RMB 267.48 million**, offset by **RMB 37.56 million** in 2023 final dividends paid and **RMB 0.55 million** from share repurchases, resulting in an ending total equity of **RMB 4.149 billion**[6](index=6&type=chunk) [Condensed Consolidated Statement of Cash Flows](index=7&type=section&id=Condensed%20Consolidated%20Statement%20of%20Cash%20Flows) In H1 2024, net cash inflow from operating activities was RMB 482.68 million, up 20.7%, while investing activities turned to a net inflow of RMB 215.81 million, and financing activities saw a significant net outflow of RMB 503.78 million primarily for loan repayments, increasing period-end cash and cash equivalents to RMB 1.095 billion Condensed Consolidated Statement of Cash Flows (For the six months ended June 30) | Item | H1 2024 (RMB thousands) | H1 2023 (RMB thousands) | | :--- | :--- | :--- | | **Net cash inflow from operating activities** | 482,678 | 399,882 | | **Net cash from/(used in) investing activities** | 215,812 | (212,027) | | **Net cash used in financing activities** | (503,783) | (88,019) | | **Net increase in cash and cash equivalents** | 194,707 | 99,836 | | **Cash and cash equivalents at end of period** | 1,094,537 | 1,102,821 | [Notes to the Unaudited Interim Financial Report](index=8&type=section&id=Notes%20to%20the%20Unaudited%20Interim%20Financial%20Report) [3 SEGMENT INFORMATION](index=9&type=section&id=3%20SEGMENT%20INFORMATION) The company operates in two segments: Upstream Products and Fermentation & Downstream Products; in H1 2024, Upstream Products saw reduced revenue but turned profitable with RMB 98.34 million in segment results, while Fermentation & Downstream Products significantly grew both revenue and results to RMB 255.95 million, becoming the core profit driver Segment Results (For the six months ended June 30) | Segment | H1 2024 (RMB thousands) | H1 2023 (RMB thousands) | | :--- | :--- | :--- | | **Upstream Products** | | | | External sales | 3,524,090 | 4,349,545 | | Segment results | 98,337 | (93,324) | | **Fermentation and Downstream Products** | | | | External sales | 2,121,424 | 1,464,778 | | Segment results | 255,951 | 58,500 | [8 DIVIDENDS](index=12&type=section&id=8%20DIVIDENDS) The Board does not recommend an interim dividend for the six months ended June 30, 2024, while the 2023 final dividend of HK 0.69 cents per share remained consistent with 2022 - The Board does not recommend an interim dividend for 2024 (2023 corresponding period: nil)[20](index=20&type=chunk)[21](index=21&type=chunk) [12 SHARE CAPITAL](index=14&type=section&id=12%20SHARE%20CAPITAL) During the reporting period, the company repurchased 4.075 million shares on the Stock Exchange for approximately HKD 0.607 million, all of which have been cancelled, resulting in 5,964,492,043 ordinary shares issued as of June 30, 2024 - The company repurchased a total of **4,075,000 shares** in March and April 2024 for a total consideration of **HKD 0.607 million**, which have been cancelled[28](index=28&type=chunk)[29](index=29&type=chunk) [14 BORROWINGS](index=16&type=section&id=14%20BORROWINGS) As of June 30, 2024, total borrowings significantly decreased by 86.9% to **RMB 73.32 million** from **RMB 559.37 million** at the end of 2023, with all borrowings classified as short-term and due within one year Borrowings | Item | June 30, 2024 (RMB thousands) | December 31, 2023 (RMB thousands) | | :--- | :--- | :--- | | **Borrowings repayable within one year** | 73,316 | 559,365 | | Of which: Bank borrowings | 29,508 | 518,585 | | Of which: Other borrowings | 43,808 | 40,780 | [Management Discussion and Analysis](index=17&type=section&id=Management%20Discussion%20and%20Analysis) [INDUSTRY OVERVIEW AND COMPANY DEVELOPMENT](index=17&type=section&id=INDUSTRY%20OVERVIEW%20AND%20COMPANY%20DEVELOPMENT) In H1 2024, the corn starch and lysine markets improved as oversupply was absorbed, while the company focused on enhancing production efficiency through improved wastewater treatment, strict personnel cost control, optimized equipment operation, and reduced energy consumption - Market conditions improved as the corn starch and lysine markets absorbed last year's oversupply in 2024[36](index=36&type=chunk) - Production efficiency was enhanced by improving wastewater treatment capacity, controlling headcount, optimizing equipment operation, and upgrading energy-saving equipment to reduce unit production costs[36](index=36&type=chunk) - The Shouguang production facility expansion project was completed in 2023, with lysine sales projected to reach a new record in 2024[36](index=36&type=chunk) [BUSINESS REVIEW](index=18&type=section&id=BUSINESS%20REVIEW) Upstream products saw significantly improved profit margins due to a substantial drop in corn prices, while downstream products, particularly lysine, achieved significant revenue growth by expanding overseas markets with nearly doubled export volumes, modified starch experienced both volume and price increases, and starch sugar business profitability slightly improved - Upstream products recorded increased profit margins despite lower selling prices, benefiting from a significant reduction in corn kernel costs[37](index=37&type=chunk) - Lysine products faced domestic oversupply but achieved substantial revenue growth by aggressively expanding overseas markets, with export volume increasing from **23,204 tons** to **45,708 tons**[37](index=37&type=chunk) - Modified starch saw growth in both sales volume and selling price, primarily due to enhanced wastewater treatment capacity and reduced corn costs[37](index=37&type=chunk) [FINANCIAL PERFORMANCE](index=19&type=section&id=FINANCIAL%20PERFORMANCE) Despite a slight decrease in total revenue due to lower average product selling prices, the significant decline in corn kernel costs to a new low since 2021, exceeding the product price drop, led to substantial increases in both gross profit and net profit, successfully turning the group profitable - Key to performance turnaround: The decrease in raw material costs (corn kernels) was greater than the decrease in product selling prices, leading to a significant increase in gross profit[39](index=39&type=chunk) Upstream Products Segment Performance (For the six months ended June 30) | Indicator | H1 2024 | H1 2023 | | :--- | :--- | :--- | | **Revenue (RMB thousands)** | 3,524,090 | 4,349,545 | | **Gross Profit Margin** | 5.6% | 0.4% | Fermentation and Downstream Products Segment Performance (For the six months ended June 30) | Indicator | H1 2024 | H1 2023 | | :--- | :--- | :--- | | **Revenue (RMB thousands)** | 2,121,424 | 1,464,778 | | **Gross Profit Margin** | 14.6% | 10.9% | - Total lysine product sales volume was approximately **273,256 tons**, a **71.1% year-on-year increase** (2023: 159,682 tons), serving as the primary driver for downstream business growth[44](index=44&type=chunk) - The average cost of the main raw material, corn kernels, was approximately **RMB 2,135 per ton**, a **16.4% year-on-year decrease** (2023: RMB 2,554 per ton)[47](index=47&type=chunk) [REVIEW OF OTHER OPERATIONS](index=21&type=section&id=REVIEW%20OF%20OTHER%20OPERATIONS) During the reporting period, the company effectively controlled various expenses, with slight decreases in distribution and administrative costs, and a significant **53.5% year-on-year reduction** in research expenses to **RMB 43.69 million** due to fewer research projects - Distribution expenses slightly decreased to **RMB 82.22 million**, and administrative expenses decreased to **RMB 96.21 million**[48](index=48&type=chunk)[51](index=51&type=chunk) - Research expenses significantly decreased from **RMB 94.06 million** to **RMB 43.69 million**, primarily due to a reduction in the number of research projects[53](index=53&type=chunk) [Liquidity, financial resources and capital structure](index=23&type=section&id=Liquidity%2C%20financial%20resources%20and%20capital%20structure) The company maintains a healthy financial position with ample working capital, showing improved key financial ratios including enhanced current and quick ratios, while the leverage ratio (borrowings to total assets) significantly decreased from **10.5% to 1.3%**, indicating reduced financial risk and a more robust capital structure Key Financial Performance Indicators | Indicator | June 30, 2024 | December 31, 2023 | | :--- | :--- | :--- | | **Current Ratio** | 2.8 times | 2.3 times | | **Quick Ratio** | 1.9 times | 1.6 times | | **Leverage Ratio (Borrowings/Total Assets)** | 1.3% | 10.5% | - As of June 30, 2024, the Group's total number of employees was **2,267**, a decrease from **2,310** in 2023[55](index=55&type=chunk) [Disclosure of Additional Information](index=24&type=section&id=Disclosure%20of%20Additional%20Information) [INTERIM DIVIDEND](index=24&type=section&id=INTERIM%20DIVIDEND) The Board has decided not to declare an interim dividend for the first half of 2024 - The Board does not recommend an interim dividend for the six months ended June 30, 2024 (2023: nil)[57](index=57&type=chunk)[59](index=59&type=chunk) [PURCHASE, SALE OR REDEMPTION OF THE COMPANY'S LISTED SECURITIES](index=26&type=section&id=PURCHASE%2C%20SALE%20OR%20REDEMPTION%20OF%20THE%20COMPANY%27S%20LISTED%20SECURITIES) In H1 2024, the company repurchased **4,075,000** of its own shares on the Stock Exchange for approximately **HKD 0.607 million**, with all repurchased shares cancelled by May 30, 2024 Share Repurchase Details (2024) | Month | Number of Shares | Price per Share (HKD) | Total Paid (HKD thousands) | | :--- | :--- | :--- | :--- | | **March** | 2,000,000 | 0.146 - 0.150 | 296 | | **April** | 2,075,000 | 0.145 - 0.150 | 311 | | **Total** | **4,075,000** | | **607** | [CORPORATE GOVERNANCE](index=26&type=section&id=CORPORATE%20GOVERNANCE) During the reporting period, the company complied with the Corporate Governance Code under the Listing Rules, and the Audit Committee reviewed the unaudited interim financial statements for the period - The company complied with the applicable code provisions set out in Part 2 of Appendix C1 to the Listing Rules during the reporting period[69](index=69&type=chunk) - The Audit Committee has reviewed the unaudited condensed consolidated interim financial statements for the six months ended June 30, 2024[72](index=72&type=chunk) [Corporate Information](index=28&type=section&id=Corporate%20Information) [Corporate Information](index=28&type=section&id=Corporate%20Information) This section provides essential company information including core management, Board members, registered address, principal place of business, auditors, legal advisors, principal bankers, and share registrar

[Financial Statements](index=1&type=section&id=Consolidated%20Financial%20Statements) [Consolidated Statement of Profit or Loss and Other Comprehensive Income](index=1&type=section&id=Consolidated%20Statement%20of%20Profit%20or%20Loss%20and%20Other%20Comprehensive%20Income) In the first half of 2024, the Group's performance significantly improved, turning losses into profits, with revenue slightly decreasing year-on-year but gross profit increasing by 189.4% due to cost control, resulting in a profit of RMB 267 million for the period compared to a loss of RMB 28.96 million in the prior year period | Indicator | Six Months Ended June 30, 2024 (RMB '000) | Six Months Ended June 30, 2023 (RMB '000) | Year-on-Year Change | | :--- | :--- | :--- | :--- | | Revenue | 5,645,514 | 5,814,323 | -2.9% | | Gross Profit | 507,180 | 175,247 | +189.4% | | Operating Profit/(Loss) | 342,483 | (45,735) | Turned Loss to Profit | | Profit/(Loss) for the Period | 267,482 | (28,959) | Turned Loss to Profit | | Profit/(Loss) Attributable to Owners of the Company | 214,659 | (37,754) | Turned Loss to Profit | | Basic Earnings/(Loss) Per Share (RMB) | 0.0360 | (0.0063) | Turned Loss to Profit | [Consolidated Statement of Financial Position](index=2&type=section&id=Consolidated%20Statement%20of%20Financial%20Position) As of June 30, 2024, the company's total assets were RMB 5.44 billion, a slight increase from the end of 2023, with total equity growing by 5.4% to RMB 4.15 billion and total liabilities decreasing by 8.9% to RMB 1.29 billion, indicating a more stable financial structure and enhanced solvency | Indicator | June 30, 2024 (RMB '000) | December 31, 2023 (RMB '000) | Period Change | | :--- | :--- | :--- | :--- | | Total Non-current Assets | 2,549,859 | 2,655,002 | -4.0% | | Total Current Assets | 2,889,845 | 2,697,624 | +7.1% | | **Total Assets** | **5,439,704** | **5,352,626** | **+1.6%** | | **Total Equity** | **4,149,048** | **3,936,553** | **+5.4%** | | Total Non-current Liabilities | 267,907 | 223,699 | +19.8% | | Total Current Liabilities | 1,022,749 | 1,192,374 | -14.2% | | **Total Liabilities** | **1,290,656** | **1,416,073** | **-8.9%** | [8. Dividends](index=6&type=section&id=8.%20Dividends) The Board decided not to declare an interim dividend for the first half of 2024, consistent with the prior year's policy, while the final dividend for 2023 was approved in May 2024 - The Board did not recommend the payment of an interim dividend for the six months ended June 30, 2024 (2023: nil)[11](index=11&type=chunk)[32](index=32&type=chunk) - On May 21, 2024, shareholders approved the declaration of a final dividend of **HKD 0.0069 per share** for 2023[11](index=11&type=chunk) [Management Discussion and Analysis](index=8&type=section&id=Management%20Discussion%20and%20Analysis) [Industry Overview and Company Development](index=8&type=section&id=Industry%20Overview%20and%20Company%20Development) In the first half of 2024, the business environment for corn starch and lysine improved as the market gradually absorbed oversupply, with the company focusing on enhancing production efficiency and expanding capacity to achieve competitive low unit production costs through measures like improved wastewater treatment, strict labor cost control, and optimized equipment energy consumption - Lysine production significantly increased due to the completion of the Shouguang production facility expansion project in 2023, with management confident that **lysine sales volume in 2024** will set a new record[15](index=15&type=chunk) - The company implemented multiple measures to enhance production efficiency, including: - Improving wastewater treatment capacity and reducing treatment costs - Strictly controlling employee numbers and wages through job restructuring - Optimizing equipment operating efficiency and replacing high-energy-consuming equipment to reduce utility costs[15](index=15&type=chunk) [Business Review](index=8&type=section&id=Business%20Review) The Upstream Products segment significantly improved gross margin due to lower raw material costs, while the Fermentation and Downstream Products segment saw substantial revenue growth driven by a near doubling of lysine export volume through successful overseas market expansion, offsetting domestic market weakness [Upstream Products](index=8&type=section&id=Upstream%20Products) Despite lower market prices for corn starch and its by-products during the review period compared to the prior year, the segment's gross margin significantly increased due to a substantial drop in the price of the main raw material, corn kernels, with lower product prices regaining attractiveness to end-users and market share from substitutes - The gross margin of the Upstream business segment increased due to a significant decrease in corn kernel prices[16](index=16&type=chunk) - Management believes that in the short term, the performance of this business segment will primarily be affected by raw material costs[16](index=16&type=chunk) [Fermentation and Downstream Products](index=9&type=section&id=Fermentation%20and%20Downstream%20Products) Despite the domestic lysine market remaining oversupplied, the company achieved substantial revenue growth by vigorously expanding overseas markets, with lysine export volume increasing from 23,000 tons in the prior year period to approximately 46,000 tons, while profitability and sales volume for starch sugar and modified starch businesses also improved - Through overseas market expansion, lysine product revenue recorded substantial growth, with export volume approximately **45,708 tons**, compared to **23,204 tons** in the first half of 2023[17](index=17&type=chunk) - The starch sugar business saw a slight improvement in profitability due to rising market prices[17](index=17&type=chunk) - Sales volume and selling prices for the modified starch business both increased, primarily benefiting from improved wastewater treatment capacity[17](index=17&type=chunk) [Financial Performance Analysis](index=9&type=section&id=Financial%20Performance) The Group's overall financial performance was strong, with total revenue slightly decreasing due to lower average selling prices, but a greater decline in the cost of the main raw material, corn kernels, drove a significant increase in gross profit and gross margin, ultimately turning losses into profits [Overall Financial Performance](index=9&type=section&id=Financial%20Performance-Overview) In the first half of 2024, revenue was RMB 5.646 billion, a slight decrease of 2.9% year-on-year; however, due to a greater decline in raw material costs than product selling prices, gross profit significantly increased by 189.4% to RMB 507 million, and the Group achieved a post-tax profit of RMB 267 million, compared to a loss of RMB 28.96 million in the prior year period | Indicator | Six Months Ended June 30, 2024 (RMB '000) | Six Months Ended June 30, 2023 (RMB '000) | Year-on-Year Change | | :--- | :--- | :--- | :--- | | Revenue | 5,645,514 | 5,814,323 | -2.9% | | Gross Profit | 507,180 | 175,247 | +189.4% | | Profit/(Loss) Before Tax | 355,294 | (38,300) | Turned Loss to Profit | | Profit/(Loss) After Tax | 267,482 | (28,959) | Turned Loss to Profit | [Segment Performance](index=9&type=section&id=Segment%20Performance) The Upstream Products segment's gross margin significantly improved from 0.4% to 5.6%, while the Fermentation and Downstream Products segment performed exceptionally well, with revenue increasing by 44.8% year-on-year and gross margin rising from 10.9% to 14.6%, primarily driven by a substantial increase in lysine sales volume Upstream Products Segment Performance | Indicator | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | | :--- | :--- | :--- | | Revenue (RMB '000) | 3,524,090 | 4,349,545 | | Gross Profit (RMB '000) | 198,370 | 16,051 | | Gross Margin | 5.6% | 0.4% | Fermentation and Downstream Products Segment Performance | Indicator | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | | :--- | :--- | :--- | | Total Revenue (RMB '000) | 2,121,424 | 1,464,778 | | Gross Profit (RMB '000) | 308,810 | 159,196 | | Gross Margin | 14.6% | 10.9% | - Total lysine product sales volume was approximately **273,256 tons**, a year-on-year increase of **71.1%** (2023 corresponding period: **159,682 tons**), with export sales significantly increasing by **163%** to **RMB 471 million**[20](index=20&type=chunk) [Cost of Sales and Expenses](index=10&type=section&id=Cost%20of%20Sales) The core driver of the significant gross profit increase was a substantial drop in the market price of the main raw material, corn kernels, with average costs decreasing by 16.4% year-on-year, while the company effectively controlled expenses, leading to a 53.5% year-on-year decrease in research expenses due to fewer projects - The average cost of the main raw material, corn kernels, was approximately **RMB 2,135 per ton**, a significant decrease from **RMB 2,554 per ton** in the prior year period[21](index=21&type=chunk) - Research expenses significantly decreased from **RMB 94.056 million** to **RMB 43.689 million** due to a reduction in the number of projects[24](index=24&type=chunk) [Liquidity and Financial Resources](index=12&type=section&id=Liquidity%2C%20Financial%20Resources%20and%20Capital%20Structure) The Group's financial position is healthy with ample working capital, and key financial ratios show strong performance, particularly the leverage ratio which significantly decreased from 10.5% to 1.3%, indicating reduced financial risk and enhanced solvency, while current and quick ratios also improved to 2.8 times and 1.9 times respectively | Key Financial Performance Indicators | June 30, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Accounts Receivable Turnover Days | 15 | 12 | | Inventory Turnover Days | 29 | 26 | | Current Ratio | 2.8 times | 2.3 times | | Quick Ratio | 1.9 times | 1.6 times | | Leverage Ratio (Borrowings/Total Assets) | 1.3% | 10.5% | [Other Disclosures](index=13&type=section&id=Other%20Disclosures) [Purchase, Sale or Redemption of the Company's Listed Securities](index=13&type=section&id=Purchase%2C%20Sale%20or%20Redemption%20of%20the%20Company%27s%20Listed%20Securities) To protect shareholder value, the company actively repurchased shares during the reporting period, buying back a total of **4.075 million** of its own shares on the Stock Exchange in March and April 2024 for a total consideration of approximately **HKD 0.607 million**, with all repurchased shares subsequently cancelled | Repurchase Month (2024) | Number of Shares | Price Paid Per Share (HKD) | Total Paid (HKD '000) | | :--- | :--- | :--- | :--- | | March | 2,000,000 | 0.146 - 0.150 | 296 | | April | 2,075,000 | 0.145 - 0.150 | 311 | | **Total** | **4,075,000** | | **607** | [Corporate Governance](index=13&type=section&id=Corporate%20Governance) The company complied with the Corporate Governance Code in the Hong Kong Stock Exchange Listing Rules during the reporting period, and the Audit Committee, comprising all independent non-executive directors, reviewed the unaudited condensed consolidated interim financial statements for this period - The company complied with the applicable code provisions of the Listing Rules during the reporting period, except for the Chairman's absence from the Annual General Meeting due to other commitments[34](index=34&type=chunk) - The Audit Committee reviewed the unaudited condensed consolidated interim financial statements for the six months ended June 30, 2024[35](index=35&type=chunk)

Financial Performance - For the year ended December 31, 2023, the total revenue was RMB 11,797,534, a decrease of 1.26% from RMB 11,948,852 in 2022[5] - Gross profit for the year was RMB 556,572, down 53.3% from RMB 1,190,475 in the previous year[5] - Operating profit decreased significantly to RMB 157,470, a decline of 74.0% compared to RMB 607,326 in 2022[5] - The net profit attributable to shareholders was RMB 107,959, down 69.4% from RMB 352,009 in the prior year[5] - Basic and diluted earnings per share were RMB 0.0180, compared to RMB 0.0587 in 2022, reflecting a decrease of 69.3%[5] - For the fiscal year ending December 31, 2023, the company's revenue was RMB 11,797,534,000, a decrease of 1.3% compared to RMB 11,948,852,000 in 2022[26] - Gross profit for 2023 was RMB 556,572,000, reflecting a significant decline of 53.2% from RMB 1,190,475,000 in the previous year[26] - Operating profit dropped by 74.1% to RMB 157,470,000 in 2023, down from RMB 607,326,000 in 2022[26] - The net profit attributable to shareholders for 2023 was RMB 107,959,000, a decrease of 69.3% compared to RMB 352,009,000 in 2022[26] - The total revenue for the year ended December 31, 2023, decreased by 1.3% to approximately RMB 11,797,534,000 compared to RMB 11,948,852,000 in 2022[70] - The gross profit significantly dropped by 53.2% to approximately RMB 556,572,000 from RMB 1,190,475,000 in the previous year[70] Assets and Liabilities - Total assets increased to RMB 5,352,626, up from RMB 5,105,848 in 2022, representing a growth of 4.84%[6] - Non-current assets rose to RMB 2,655,002, an increase of 8.84% from RMB 2,439,327 in the previous year[6] - Current assets totaled RMB 2,697,624, slightly up from RMB 2,666,521 in 2022, indicating a growth of 1.16%[6] - The total liabilities increased to RMB 1,416,073,000 in 2023 from RMB 1,284,065,000 in 2022, indicating a rise in financial obligations[29] - Deferred income decreased to RMB 164,751,000 in 2023 from RMB 244,722,000 in 2022, reflecting changes in revenue recognition[29] Sales and Market Performance - The company reported a substantial increase in sales volume of modified starch during the review period, despite challenges from urban wastewater treatment policies[24] - The average market prices of agricultural products, including soybeans, wheat, and corn, were lower in 2023 compared to 2022, indicating a global economic downturn[22] - The company's sales to external customers in China amounted to RMB 10,856,939,000, while sales to other countries were RMB 940,595,000 in 2023[33] - Total revenue from upstream products slightly decreased, with corn starch average selling price down 2% to RMB 2,816 per ton, while sales volume increased to approximately 2,007,204 tons from 1,953,563 tons in 2022[50] - Revenue from lysine products decreased to RMB 2,261,792,000 from RMB 2,424,684,000, despite an increase in sales volume to approximately 340,746 tons from 314,179 tons, indicating an average selling price drop to RMB 6,638 per ton from RMB 7,718 per ton[51] - The upstream product segment accounted for about 72.9% of the annual revenue, indicating its critical role in the company's performance[67] - Revenue from lysine and corn protein powder, key raw materials for animal feed, was significantly impacted due to oversupply in the pork market[68] - The average selling price of starch sugar increased by 15.5% to RMB 2,629 per ton, while sales volume decreased by 24.4% to 179,598 tons[74] - Other fermentation products saw a substantial revenue increase of 42.4% to approximately RMB 115,098,000, attributed to the full-year impact after trial operations in 2022[75] Expenses and Cost Management - Distribution expenses reduced to RMB 157,175,000 from RMB 171,044,000, primarily due to decreased delivery costs[54] - Research expenses significantly decreased to RMB 160,490,000 from RMB 324,108,000, attributed to a reduction in the number of research projects[55] - The total sales cost rose to RMB 11,240,962,000 from RMB 10,758,377,000 in the previous year, with stable corn grain costs at RMB 2,543 per ton[75] Shareholder Information - The company plans to distribute a final dividend of HKD 0.69 per share, totaling RMB 41,183,000, pending shareholder approval[14] - The proposed final dividend for the fiscal year ending December 31, 2023, is 0.69 HKD per share, subject to shareholder approval at the 2024 annual general meeting[92] - The company maintained a reserve of approximately RMB 125,739,000 available for distribution to shareholders as of December 31, 2023[83] - The total shareholder return rate for 2023 was -36.5%, compared to 9.4% in 2022[90] - The company repurchased a total of 25,565,000 shares at an approximate cost of 3,375,000 HKD during the fiscal year ending December 31, 2023[95] Financial Ratios and Credit Management - The company's current ratio decreased to 2.3 in 2023 from 2.8 in 2022, while the quick ratio also declined from 1.9 to 1.6[90] - The leverage ratio increased to 10.5% in 2023 from 5.6% in 2022[90] - Accounts receivable turnover days increased to 12 days in 2023 from 11 days in 2022, while accounts payable turnover days decreased to 5 days from 7 days[90] - The company did not mortgage any leased land or buildings for bank credit as of December 31, 2023[91] - The company provided RMB 500,000,000 in deposits and RMB 18,585,000 in bank acceptance notes as collateral for bank credit and payables[91] - As of December 31, 2023, total bank borrowings amounted to approximately RMB 518,585,000, primarily short-term loans[82] Future Outlook and Developments - The company is collaborating closely with local governments to establish a lactic acid ester production facility, with further announcements to be made in accordance with the listing rules[21] - The company anticipates market consolidation in the corn deep processing industry, aiming for a new supply-demand balance in the coming year[42] - The company has completed the construction of pilot production lines for polylactic acid and other products, which will be used for new product development and market research[44] - The company plans to publish its annual report containing all required information on or around April 16, 2024[98] - The board of directors has reviewed the audited consolidated results for the fiscal year ending December 31, 2023[97]

Financial Performance - For the six months ended June 30, 2023, total sales to external customers amounted to RMB 5,814,428, with upstream products contributing RMB 4,132,319 and downstream products contributing RMB 1,682,109[6]. - The reportable segment results showed a profit of RMB 505,758, with upstream products generating RMB 222,092 and downstream products generating RMB 283,666[6]. - The profit attributable to owners of the Company for the same period was a loss of RMB 37,754, compared to a profit of RMB 262,330 in the previous year[9]. - The Group recorded a loss before taxation of RMB38,300,000 for the six months ended 30 June 2023, compared to a profit of RMB452,654,000 in 2022[39]. - The Group's loss after taxation for the period was RMB28,959,000, compared to a profit of RMB364,695,000 in 2022[39]. - The gross profit for the same period was RMB 175,247, significantly down from RMB 725,479 in 2022, indicating a decline of approximately 75.8%[123]. - The operating loss for the first half of 2023 was RMB 45,735, compared to an operating profit of RMB 445,206 in the previous year[123]. - The net loss attributable to owners of the company was RMB 37,754, contrasting with a profit of RMB 262,330 in the first half of 2022[123]. Revenue Breakdown - Revenue from upstream products increased to RMB4,349,545,000, up from RMB4,132,319,000 in 2022, with cornstarch sales volume reaching approximately 1,007,971 tonnes, compared to 927,221 tonnes in 2022[40][44]. - Revenue from the fermented and downstream products segment decreased significantly to RMB1,464,778,000 (2022: RMB1,682,109,000), with a gross profit margin of 10.9% (2022: 27.2%) and a gross profit of RMB159,196,000 (2022: RMB457,090,000)[46]. - Revenue of lysine products was RMB1,012,954,000 (2022: RMB1,275,857,000), with an average selling price decreasing to RMB6,344 per tonne (2022: RMB8,344) and sales volume increasing to approximately 159,682 tonnes (2022: 152,910 tonnes)[46]. - Revenue of starch-based sweetener was RMB237,182,000 (2022: RMB285,148,000), with sales volume decreasing to 93,998 tonnes (2022: 132,384 tonnes) and the average selling price increasing to approximately RMB2,523 per tonne (2022: RMB2,154 per tonne)[46]. - Revenue of modified starch increased to RMB154,371,000 (2022: RMB94,541,000), attributed to the successful development of liquid-modified starch[46]. - Revenue of new biobased material and others was RMB60,271,000 (2022: RMB26,563,000), with the increase mainly due to the full year effect after the trial-run in 2022[50]. Cost and Expenses - The gross profit margin for upstream products significantly declined to 0.4% from 6.5% in 2022, reflecting weak market sentiment[44]. - Distribution expenses decreased to RMB82,360,000 from RMB85,501,000, attributed to customers' preference for self-arranged delivery and increased use of bulk cargo delivery[34]. - The gross profit margin of the Group diminished due to suppressed market demand and prices of cornstarch and its related products, along with comparatively higher production costs per unit[58]. - The Group's electricity and steam expenses remained high despite the economic recession in the domestic market[52]. - For the six months ended June 30, 2023, administrative expenses decreased significantly to RMB98,603,000 from RMB104,325,000, mainly due to a reduction in government levies[74]. - Research expenses decreased substantially to RMB94,056,000 from RMB151,496,000, influenced by the number and complexity of new research projects[76]. - Distribution expenses totaled RMB66,939,000 (2022: RMB70,794,000), while total distribution and administrative expenses were RMB82,360,000 (2022: RMB85,501,000)[54]. Assets and Liabilities - Total assets as of June 30, 2023, amounted to RMB 4,915,509, a decrease from RMB 5,105,848 at the end of 2022[125]. - Current assets decreased to RMB 2,406,012 from RMB 2,666,521 at the end of 2022, reflecting a decline of approximately 9.7%[125]. - Total liabilities as of June 30, 2023, amounted to RMB 1,162,224, down from RMB 1,284,065 as of June 30, 2022, indicating a reduction of approximately 9.5%[132]. - Total current liabilities as of June 30, 2023, were RMB 890,184, a decrease from RMB 965,933 as of June 30, 2022, showing a reduction of approximately 7.8%[132]. - The current ratio as of June 30, 2023, was 2.7, slightly down from 2.8 as of December 31, 2022[89]. - The gearing ratio, defined as borrowings to total assets, improved to 4.6% from 9.4%[89]. Cash Flow - The net cash inflow from operating activities for the six months ended June 30, 2023, was RMB 399,882, a significant improvement compared to a net outflow of RMB 139,002 in the same period of 2022[135]. - Cash and cash equivalents increased to RMB 1,102,821 from RMB 1,002,985, showing a growth of about 9.9%[125]. - Cash and cash equivalents increased to RMB 1,102,821 as of June 30, 2023, from RMB 792,185 as of June 30, 2022, representing a growth of approximately 39.2%[135]. - The company reported a net cash outflow from investing activities of RMB 212,027 for the first half of 2023, compared to RMB 62,666 in the same period of 2022, indicating a significant increase in investment expenditures[135]. Staffing and Management - The number of staff decreased to 2,310 from 2,392 in 2022[90]. - Total staff costs for the six months ended June 30, 2023, were approximately RMB139,483,000, an increase from RMB125,578,000 in 2022[90]. - The Directors believe that the working capital available to the Group is sufficient for its present requirements[89]. - The Group provided a deposit of RMB201,645,000 and bank acceptance bills of RMB4,496,000 as collateral for banking facilities as of June 30, 2023[94]. Dividends and Shareholder Information - The Company did not recommend an interim dividend for the six months ended June 30, 2023[81]. - The Board did not recommend the payment of an interim dividend for the six months ended June 30, 2023, consistent with 2022[96]. - Merry Boom holds 3,705,385,194 shares, representing 61.81% of the issued share capital, with Mr. Tian Qixiang owning approximately 54.58% of Merry Boom[114]. Taxation - The effective tax rate for the Group's PRC subsidiaries is 25%, with one subsidiary benefiting from a preferential rate of 15%[158]. - Current income tax for PRC Enterprises Income Tax decreased to RMB 6,325,000 in 2023 from RMB 104,378,000 in 2022, representing a decline of approximately 93.9%[176]. - The over-provision in prior years resulted in a credit of RMB 14,156,000 in 2023, compared to no such provision in 2022[176].

[Consolidated Financial Statements](index=1&type=section&id=Consolidated%20Financial%20Statements) [Consolidated Statement of Profit or Loss and Other Comprehensive Income](index=1&type=section&id=Consolidated%20Statement%20of%20Profit%20or%20Loss%20and%20Other%20Comprehensive%20Income) For the six months ended June 30, 2023, the company turned from profit to loss, with revenue largely flat year-on-year, but gross profit significantly declined by over 75%, resulting in an operating loss of **45.74 million RMB** and a net loss of **28.96 million RMB** Summary of Consolidated Statement of Profit or Loss (For the six months ended June 30) | Metric | 2023 (thousand RMB) | 2022 (thousand RMB) | YoY Change | | :--- | :--- | :--- | :--- | | Revenue | 5,814,323 | 5,814,428 | -0.002% | | Gross Profit | 175,247 | 725,479 | -75.8% | | Operating (Loss)/Profit | (45,735) | 445,206 | Turned from profit to loss | | (Loss)/Profit for the Period | (28,959) | 364,695 | Turned from profit to loss | | (Loss)/Profit attributable to owners of the Company | (37,754) | 262,330 | Turned from profit to loss | | (Loss)/Earnings per share (RMB) | (0.0063) | 0.0438 | Turned from profit to loss | [Consolidated Statement of Financial Position](index=2&type=section&id=Consolidated%20Statement%20of%20Financial%20Position) As of June 30, 2023, the company's total assets were **4.916 billion RMB**, a slight decrease from the end of 2022, with total liabilities decreasing to **1.162 billion RMB** and total owners' equity at **3.753 billion RMB**, maintaining an overall stable financial structure Summary of Consolidated Statement of Financial Position | Metric | June 30, 2023 (thousand RMB) | December 31, 2022 (thousand RMB) | | :--- | :--- | :--- | | **Assets** | | | | Total Non-current Assets | 2,509,497 | 2,439,327 | | Total Current Assets | 2,406,012 | 2,666,521 | | **Total Assets** | **4,915,509** | **5,105,848** | | **Equity and Liabilities** | | | | **Total Equity** | **3,753,285** | **3,821,783** | | Total Non-current Liabilities | 272,040 | 318,132 | | Total Current Liabilities | 890,184 | 965,933 | | **Total Liabilities** | **1,162,224** | **1,284,065** | [Management Discussion and Analysis](index=8&type=section&id=Management%20Discussion%20and%20Analysis) [Industry Overview and Corporate Development](index=8&type=section&id=Industry%20Overview%20and%20Corporate%20Development) In the first half of 2023, the market faced dual challenges of oversupply and weak demand, with significant price drops for corn starch and its derivatives, while downstream aquaculture demand contracted due to falling hog prices. To address these difficulties, the company optimized production, reduced inventory, strengthened quality supervision, and advanced its lysine expansion and polylactic acid pilot production line projects as planned - The market environment is severe, with key challenges including: - **Oversupply**: Manufacturers resuming operations led to product oversupply, while limited recovery in export demand caused product market prices to fall[38](index=38&type=chunk) - **Weak Demand**: Falling pork prices led to a reduction in pig farming scale, weakening demand for lysine[20](index=20&type=chunk) - **Substitute Competition**: Declining wheat and soybean prices, and their by-products, suppressed downstream use of corn starch products[60](index=60&type=chunk) - The company adopted multiple strategies to maintain competitive advantages, including optimizing production arrangements, reducing inventory levels to ease working capital pressure, and strengthening the product quality supervision system[21](index=21&type=chunk)[61](index=61&type=chunk)[39](index=39&type=chunk) - Key projects are progressing smoothly: the expansion of lysine annual production capacity from **300,000 tons to 500,000 tons**, and the construction of a **5,000-ton** annual capacity pilot production line for lactide and polylactic acid are both on schedule, with the target completion date remaining the end of 2023[61](index=61&type=chunk) [Business Review](index=8&type=section&id=Business%20Review) During the reporting period, the company's two business segments showed divergent performance. Upstream products saw increased sales but a sharp decline in gross profit margin due to falling prices, while fermentation and downstream products experienced significant drops in both revenue and gross profit margin due to stagnant market demand [Upstream Products](index=9&type=section&id=Upstream%20Products) Upstream product revenue increased by **5.3%** year-on-year to **4.35 billion RMB**, primarily driven by a significant increase in sales volume. However, due to market oversupply putting pressure on average selling prices, the gross profit margin sharply declined from **6.5%** in the prior period to **0.4%** Upstream Products Segment Performance (For the six months ended June 30) | Metric | 2023 (thousand RMB) | 2022 (thousand RMB) | | :--- | :--- | :--- | | Revenue | 4,349,545 | 4,132,319 | | Gross Profit | 16,051 | 268,389 | | Gross Profit Margin | 0.4% | 6.5% | - Corn starch sales volume increased to approximately **1,007,971 tons** (2022: **927,221 tons**), but the average selling price decreased to approximately **2,740 RMB per ton** (2022: **2,936 RMB per ton**)[46](index=46&type=chunk) [Fermentation and Downstream Products](index=10&type=section&id=Fermentation%20and%20Downstream%20Products) Fermentation and downstream products segment revenue decreased by **12.9%** year-on-year to **1.46 billion RMB**, with gross profit margin falling from **27.2%** to **10.9%**. This was primarily due to weak demand in the lysine market caused by falling hog prices, leading to a significant drop in average selling prices. The modified starch business achieved revenue growth through new product development, becoming a highlight for this segment Fermentation and Downstream Products Segment Performance (For the six months ended June 30) | Metric | 2023 (thousand RMB) | 2022 (thousand RMB) | | :--- | :--- | :--- | | Revenue | 1,464,778 | 1,682,109 | | Gross Profit | 159,196 | 457,090 | | Gross Profit Margin | 10.9% | 27.2% | - Lysine product revenue decreased to **1.01 billion RMB** (2022: **1.28 billion RMB**), with the average selling price falling from **8,344 RMB per ton** to **6,344 RMB per ton**, despite sales volume increasing from **153,000 tons** to **160,000 tons**[48](index=48&type=chunk) - Modified starch revenue increased to **154 million RMB** (2022: **95 million RMB**), primarily due to the successful development of liquid modified starch[49](index=49&type=chunk) [Financial Performance Analysis](index=9&type=section&id=Financial%20Performance%20Analysis) During the reporting period, the company's overall revenue slightly decreased, but gross profit significantly declined due to suppressed market prices and relatively higher production costs. The average purchase price of corn, a key raw material, remained higher than the prior period. All operating expenses decreased, with research and development expenses showing the most significant reduction - Although corn grain prices gradually decreased, the average purchase price during the reporting period remained higher than the prior period, at approximately **2,554 RMB per ton** (2022: **2,529 RMB per ton**)[69](index=69&type=chunk) - The decline in gross profit margin was primarily due to (i) suppressed market demand and prices for corn starch and related products, and (ii) relatively higher unit production costs[70](index=70&type=chunk) - All expenses decreased: - **Distribution expenses**: Decreased to **82.36 million RMB**, as more customers opted for self-pickup and bulk transportation[72](index=72&type=chunk) - **Administrative expenses**: Decreased to **98.60 million RMB**, mainly due to reduced government levies[85](index=85&type=chunk) - **Research expenses**: Significantly decreased to **94.06 million RMB**, influenced by the number, progress, and available resources of new projects[86](index=86&type=chunk) [Liquidity, Financial Resources and Capital Structure](index=12&type=section&id=Liquidity%2C%20Financial%20Resources%20and%20Capital%20Structure) The company considers its working capital sufficient and financial position robust. As of the period end, all borrowings were short-term, and the gearing ratio significantly decreased from **9.4%** to **4.6%**. Operational efficiency metrics such as inventory turnover days and accounts receivable/payable turnover days remained stable Key Financial Ratios | Metric | June 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Accounts Receivable Turnover (days) | 11 | 11 | | Accounts Payable Turnover (days) | 6 | 7 | | Inventory Turnover (days) | 24 | 25 | | Current Ratio (times) | 2.7 | 2.8 | | Quick Ratio (times) | 2.0 | 1.9 | | Gearing Ratio (Borrowings/Total Assets) | 4.6% | 9.4% | - As of June 30, 2023, all of the Group's borrowings were short-term, totaling approximately **227 million RMB**. Most borrowings were denominated in RMB and bore fixed interest rates[54](index=54&type=chunk) - As of June 30, 2023, the Group had a total of **2,310 employees** (end of 2022: **2,392 employees**), with total employee costs for the first half of the year approximately **139 million RMB**[77](index=77&type=chunk) [Dividends and Corporate Governance](index=13&type=section&id=Dividends%20and%20Corporate%20Governance) [Interim Dividend](index=13&type=section&id=Interim%20Dividend) The Board does not recommend the payment of an interim dividend for the six months ended June 30, 2023, consistent with the policy for the prior period - The Board does not recommend the payment of an interim dividend for the six months ended June 30, 2023 (2022: nil)[13](index=13&type=chunk)[79](index=79&type=chunk) [Corporate Governance](index=13&type=section&id=Corporate%20Governance) During the reporting period, the company complied with the Corporate Governance Code in the Listing Rules. The Audit Committee has reviewed the unaudited financial statements for the current period - The company has complied with the applicable provisions of the Corporate Governance Code as set out in Appendix 14 to the Listing Rules[81](index=81&type=chunk) - The Audit Committee (comprising all independent non-executive directors) has reviewed the unaudited condensed consolidated interim financial statements for the six months ended June 30, 2023[82](index=82&type=chunk) [Notes to the Financial Statements](index=4&type=section&id=Notes%20to%20the%20Financial%20Statements) [3 Segment Information](index=4&type=section&id=3%20Segment%20Information) The company's business is divided into two reportable segments: Upstream Products and Fermentation and Downstream Products. In the first half of 2023, external sales for the Upstream Products segment were **4.35 billion RMB**, and for Fermentation and Downstream Products, they were **1.46 billion RMB**. In terms of segment results, Upstream Products recorded a loss of **93.32 million RMB**, while Fermentation and Downstream Products recorded a profit of **58.50 million RMB** Summary of Segment Results (For the six months ended June 30, 2023) | Item (thousand RMB) | Upstream Products | Fermentation and Downstream Products | Total | | :--- | :--- | :--- | :--- | | Sales to external customers | 4,349,545 | 1,464,778 | 5,814,323 | | Reportable segment results | (93,324) | 58,500 | (34,824) | [7 Earnings (loss) per share](index=6&type=section&id=7%20Earnings%20%28loss%29%20per%20share) The loss attributable to owners of the company for the current period was **37.754 million RMB**, resulting in a basic loss per share of **0.0063 RMB** based on **5.994 billion** weighted average ordinary shares outstanding. In the prior period, it was an earnings per share of **0.0438 RMB**. Diluted loss per share is not presented as there are no potential dilutive ordinary shares Basic (Loss)/Earnings Per Share Calculation | Item | For the six months ended June 30 (2023) | For the six months ended June 30 (2022) | | :--- | :--- | :--- | | (Loss)/Profit attributable to owners of the Company (thousand RMB) | (37,754) | 262,330 | | Weighted average number of ordinary shares outstanding (thousand shares) | 5,994,132 | 5,994,132 | [9 Trade and other receivables](index=6&type=section&id=9%20Trade%20and%20other%20receivables) As of the period end, total trade and other receivables were **480 million RMB**, a decrease from **590 million RMB** at the end of 2022. Trade receivables amounted to **183 million RMB**, with a healthy aging profile, over **90%** being within **30 days**. Bank acceptance notes decreased to **151 million RMB** Trade Receivables Aging Analysis (thousand RMB) | Aging | June 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | 0-30 days | 166,707 | 134,162 | | 31-60 days | 8,360 | 5,391 | | 61-90 days | 6,250 | 1,022 | | Over 90 days | 2,123 | 5,019 | | **Total** | **183,440** | **145,594** | [10 Trade and other payables](index=7&type=section&id=10%20Trade%20and%20other%20payables) As of the period end, total trade and other payables were **351 million RMB**, a slight decrease from **369 million RMB** at the end of 2022. Trade payables and bills payable combined amounted to **173 million RMB**, with the aging analysis showing an increased proportion of amounts over **90 days** Trade and Bills Payable Aging Analysis (thousand RMB) | Aging | June 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | 0-60 days | 107,588 | 163,355 | | 61-90 days | 8,680 | 2,558 | | Over 90 days | 57,076 | 30,590 | | **Total** | **173,344** | **196,503** |

Revenue and Financial Performance - The Group recorded total revenue of approximately RMB11,948,852,000 for the year, an increase from RMB11,639,315,000 in 2021, representing a growth of 2.66%[120] - Revenue from upstream products increased slightly by 1.5% to RMB8,705,998,000, with a gross profit margin of 5.1%[121] - Revenue from fermented and downstream products rose to RMB3,242,854,000, up from RMB3,062,833,000 in 2021[125] - Revenue from lysine increased from approximately RMB2,224,230,000 to RMB2,424,684,000, with an average selling price of RMB7,718 per tonne[127] - Revenue from starch-based sweeteners was approximately RMB541,364,000 in 2022, an increase from RMB519,544,000 in 2021, with liquid starch-based sweeteners representing about 72.9% of the Group's sales volume[38] - Other fermentation products saw a significant revenue increase of 56.6% to approximately RMB80,800,000 in 2022, up from RMB51,596,000 in 2021[22] - The revenue of upstream products slightly increased by 1.5% to RMB8,705,998,000, with a gross profit margin of 5.1%[101] - The gross profit for the Group increased to RMB748,760,000, with a gross profit margin of 23.1% compared to 14.9% in the previous year[102] - Basic earnings per share increased to RMB0.0587, up from RMB0.0577 in 2021[98] Costs and Expenses - The total cost of sales increased to RMB10,758,377,000 in 2022, compared to RMB10,687,104,000 in 2021, with utility expenses rising to 7.9% of total sales costs from 5.5% in the previous year[39] - Distribution expenses for the year ended December 31, 2022, increased to RMB171,044,000 from RMB164,934,000 in 2021[131] - Administrative expenses rose to RMB207,835,000, primarily due to increased staff costs and government levies[132] - The Group's delivery and logistics costs were RMB141,651,000 in 2022, slightly up from RMB138,173,000 in 2021[23] - Marketing expenses increased to RMB14,989,000 in 2022 from RMB14,450,000 in 2021, reflecting the Group's efforts to expand market share[23] Shareholder Information - The Board recommends a final dividend of HK0.69 cents per share for the year ended 31 December 2022, subject to approval at the upcoming AGM[12] - The Company maintains a sufficient public float of not less than 25% of its total issued shares, complying with Listing Rules[66] - As of December 31, 2022, Mr. Tian Qixiang holds a significant interest in Merry Boom Group Limited, owning approximately 54.58% of its shares, which translates to 3,705,385,194 shares, representing 61.81% of the company's total shareholding[74] - The Group's sales to its five largest customers accounted for less than 30% of total revenue, indicating a diversified customer base[67] - The Group's procurement from its five largest suppliers also accounted for less than 30% of total procurement, further indicating a balanced supply chain[67] Corporate Governance and Compliance - The Directors confirm that all independent non-executive Directors are independent as per the Listing Rules[12] - Related party transactions for the year ended 31 December 2022 are fully exempt connected transactions as defined in the Listing Rules[11] - There were no significant transactions or contracts involving the Group and any Director or their connected entities during the financial year, ensuring no conflicts of interest[70] - The interests of the Directors and chief executive are recorded in compliance with the Securities and Futures Ordinance, ensuring transparency[74] - The Group has not engaged in any significant transactions with substantial shareholders that would require additional disclosures[70] Environmental and Sustainability Efforts - The Group is committed to complying with all environmental policies and relevant laws, and has an internal laboratory to ensure product quality meets national standards[10] - The Environmental and Sustainability Report reviews the Group's environmental policies and key relationships with stakeholders[9] - The Group is committed to using water responsibly and aims to reduce overall resource consumption during production while maintaining production levels and efficiency[195] - The Group encourages customers to use reusable packaging materials, reflecting a commitment to sustainability[193] - The Group does not set specific targets for the reduction of nonhazardous waste emissions due to variability in product mix and production methods[193] - The Group did not produce any hazardous waste in its production plants during the year under review[193] - The total packaging material used for finished goods in 2022 was approximately 10,240 tonnes, with newly purchased reusable packaging material accounting for about 7,515 tonnes, a significant increase from 672 tonnes in 2021[193] Employee and Workplace Safety - The company emphasizes the health and safety of its employees as crucial for long-term success, implementing mandatory training and safety drills[176] - The company strictly adheres to the PRC Labour Law and promotes fair treatment in all human resources areas, including recruitment and promotion[179] - The company has implemented appropriate controls and training to minimize occupational injuries and illnesses[176] - Regular updates to the safety handbook and body checks for high-risk staff are part of the company's health and safety measures[179] - The Group had approximately 2,364 full-time staff, with total staff costs amounting to approximately RMB266,179,000, up from RMB229,470,000 in 2021[138] Future Outlook and Strategic Plans - The Group has adopted a cautious outlook for business performance in 2023 due to the uncertain market conditions following the lifting of COVID-19 restrictions[35] - The annual production capacity of lysine products will increase from 300,000 tonnes to 500,000 tonnes by the end of 2023[92] - The Group plans to establish lactide and polylactide trial production lines with an annual capacity of 5,000 tonnes each, expected to be completed by the end of 2023[92] - The company aims to become a market leader in the corn refinery industry in China through cost control, strengthening the balance sheet, and research and development[174] Research and Development - Research expenses increased significantly from RMB199,648,000 to RMB324,108,000, reflecting the Group's commitment to new product development and production method changes[159] - The Group is engaged in expanding production capacity for cornstarch and lysine products, enhancing its product pipeline, marketing force, and market coverage[200]

香港交易及結算所有限公司及香港聯合交易所有限公司對本公告的內容概不負責， 對其準確性或完整性亦不發表任何聲明，並明確表示，概不對因本公告全部或任何 部分內容而產生或因倚賴該等內容而引致的任何損失承擔任何責任。 CHINA STARCH HOLDINGS LIMITED 中 國 澱粉 控 股 有 限 公司 （於開曼群島註冊成立之有限公司） 3838 （股份代號： ） 截至二零二二年十二月三十一日止年度初步全年業績公佈 財務摘要： 二零二二年 二零二一年 人民幣千元人民幣千元 變動 11,948,852 11,639,315 +2.7% 收入 1,190,475 952,211 +25.0% 毛利 607,326 510,539 +19.0% 經營利潤 495,432 402,830 +23.0% 本年度利潤 ...

Financial Performance - Revenue for the six months ended June 30, 2022, was RMB 5,814,428, an increase of 2.01% from RMB 5,699,494 in 2021[4] - Gross profit for the same period was RMB 725,479, representing a significant increase of 84.67% compared to RMB 393,215 in 2021[4] - Operating profit reached RMB 445,206, up 99.00% from RMB 223,651 in the previous year[4] - Profit before income tax was RMB 452,654, an increase of 106.67% from RMB 219,715 in 2021[4] - Profit and total comprehensive income for the period was RMB 364,695, compared to RMB 174,707 in 2021, marking a growth of 108.67%[4] - Earnings per share attributable to owners of the Company increased to RMB 0.0438 from RMB 0.0249, reflecting a growth of 75.50%[4] Assets and Equity - Total assets as of June 30, 2022, amounted to RMB 5,157,297, an increase from RMB 4,719,159 at the end of 2021[6] - Current assets increased to RMB 2,654,513 from RMB 2,197,648, showing a growth of 20.73%[6] - Total equity attributable to owners of the Company was RMB 3,505,411, up from RMB 3,277,963 at the end of 2021[8] - Non-controlling interests increased to RMB 228,660 from RMB 214,059, indicating a growth of 6.25%[8] - As of June 30, 2022, total equity increased to RMB 3,734,071,000, up from RMB 3,492,022,000 at the beginning of the year, reflecting a growth of approximately 6.9%[10] Cash Flow and Financing - The net cash outflow from operating activities for the six months ended June 30, 2022, was RMB 139,002,000, an improvement compared to RMB 207,355,000 in the same period of 2021[12] - Cash and cash equivalents decreased to RMB 792,185,000 as of June 30, 2022, from RMB 1,000,977,000 at the beginning of the year, indicating a reduction of approximately 21%[12] - The net cash outflow from investing activities was RMB 62,666,000, significantly lower than RMB 229,600,000 in the previous year, showing a reduction of about 72.7%[12] - Proceeds from borrowings amounted to RMB 180,831,000, while repayments totaled RMB 100,000,000, resulting in a net inflow from financing activities of RMB 7,124,000[12] - The Group's total liabilities decreased from RMB 416,302,000 as of December 31, 2021, to RMB 350,647,000 as of June 30, 2022[72] Research and Development - Research expenses significantly increased to RMB 151,496 in the first half of 2022, compared to RMB 22,607 in the same period of 2021, indicating a focus on innovation and development[23][24] - The Group's commitment to research and development is expected to enhance its competitive position in the cornstarch and corn-refinery industry[96] - The business performance of new biobased materials was stable, with plans to allocate more resources to R&D for better production experience[103] Market Performance - Total sales to external customers for the six months ended June 30, 2022, amounted to RMB 5,814,428, a decrease of 6.5% compared to RMB 5,699,494 for the same period in 2021[17] - The domestic market showed strong demand for lysine products, supported by a reduction in global supply and robust animal feed market demand[98] - The Group faced challenges in the starch-based sweetener segment due to excessive production capacity in the PRC, but efforts were made to expand market share[98] - Modified starch sales volume significantly decreased due to city sewage reduction measures impacting production[98] Expenses and Cost Management - Unallocated expenses for the first half of 2022 were RMB 64,840, compared to RMB 182,161 in the same period of 2021, showing improved cost management[17] - Distribution expenses decreased to RMB 85,501,000 from RMB 91,532,000 due to the use of bulk cargo delivery and more customers picking up goods[125] - Administrative expenses increased to RMB 104,325,000 from RMB 97,934,000, primarily due to higher staff costs and government levies[130] - Staff costs for the six months ended June 30, 2022, were approximately RMB 125,578,000, up from RMB 109,981,000 in 2021, reflecting an increase in workforce[146] Taxation - Current income tax for the six months ended June 30, 2022 was RMB 104,378,000, significantly higher than RMB 32,079,000 in 2021, reflecting a substantial increase in tax expenses[27] - The Group's effective tax rate for PRC subsidiaries was 25%, with one subsidiary benefiting from a preferential rate of 15%[27] Dividends - The final dividend for 2022 was recorded at RMB 34,882,000, compared to RMB 44,941,000 for 2021, indicating a decrease of approximately 22.3%[10] - The Board did not recommend the payment of an interim dividend for the six months ended 30 June 2022, while a final dividend of HK0.69 cents per share was declared for 2021[46] Governance and Compliance - The Company complied with the Corporate Governance Code during the six months ended 30 June 2022, except for the absence of Mr. Tian Qixiang at the annual general meeting[164] - The Audit Committee has reviewed the unaudited condensed consolidated interim financial statements for the six months ended 30 June 2022[168] - The interim financial statements reflect the Company's commitment to maintaining high standards of governance and transparency[168]

Revenue and Business Segments - The Group's revenue is derived from two business segments: upstream products and fermented and downstream products, with production activities conducted in the People's Republic of China (PRC) [8]. - The Group's principal activities include investment holding and the manufacture and sale of cornstarch, lysine, starch-based sweeteners, modified starch, and ancillary corn-based products [7]. - The Group's subsidiaries are primarily engaged in the manufacture and sale of various corn-based products, contributing to its overall revenue [7]. - The Group achieved a turnover of more than RMB 11 billion for the first time in 2021 [46]. - The Group recorded total revenue of approximately RMB11,639,315,000, a significant increase from RMB8,892,261,000 in 2020, representing a growth of 30.9% [56]. - Revenue from upstream products increased by 27.3% to RMB8,576,482,000, with a gross profit margin of 5.8%, down from 6.2% in 2020 [58]. - Revenue from lysine products increased from RMB1,442,844,000 to RMB2,224,230,000, with a sales volume increase of 16.2% to about 320,638 tonnes [61]. - Revenue from fermented and downstream products rose substantially to RMB3,062,833,000, compared to RMB2,153,751,000 in 2020 [60]. - Revenue of starch-based sweetener increased to approximately RMB519,544,000, up from RMB357,781,000 in 2020, with an average selling price of RMB2,650 per tonne and sales volume of 196,049 tonnes [64]. - Revenue of modified starch decreased to RMB267,463,000 from RMB312,025,000, primarily due to reduced production from sewage disposal control [64]. - Revenue of other fermented products rose by 25.5% to approximately RMB51,596,000, compared to RMB41,101,000 in 2020 [64]. Financial Performance - Gross profit increased by 70.1% to approximately RMB952,211,000, up from RMB559,775,000 in 2020 [56]. - Profit after taxation rose significantly to RMB402,830,000, compared to RMB207,039,000 in 2020 [56]. - Basic earnings per share increased to RMB0.0577 based on a weighted average of 5,994,132,000 ordinary shares, up from RMB0.0317 based on 5,995,591,000 shares in 2020 [56]. - Distribution expenses decreased significantly to RMB164,934,000 from RMB184,229,000, due to increased use of bulk cargo delivery [66]. - Administrative expenses rose to RMB192,013,000 from RMB166,018,000, mainly due to higher staff costs and depreciation [68]. - Research expenses surged to RMB199,648,000 from RMB28,899,000, focusing on production technology innovation and corn-derivative products [69]. - Other net income increased to RMB114,923,000 from RMB80,871,000, with significant contributions from government grants and gains on sales of scrap materials [72]. - The Group's current ratio improved to 2.5 in 2021 from 1.9 in 2020, while the quick ratio increased to 1.8 from 1.2 [78]. - The gearing ratio decreased to 2.4% in 2021 from 2.8% in 2020, indicating a reduction in leverage [78]. - Total shareholder return rose significantly to 41.7% in 2021, compared to 13.3% in 2020 [78]. Dividends and Shareholder Information - The proposed final dividend is HK0.69 cents per share for the year ended 31 December 2021, subject to approval at the upcoming annual general meeting [12]. - As of December 31, 2021, Mr. Tian Qixiang holds 3,705,385,194 ordinary shares of the Company, representing 61.81% of the total shareholding [15]. - The total number of shares in issue of the Company as at December 31, 2021, is 5,994,132,043 [25]. - The Company has maintained appropriate directors and officers liability insurance for indemnifying against losses from relevant legal actions [23]. - The indemnity provision for Directors and officers was in force during the year and remains effective as of the date of the annual report [23]. - The interests of Directors are recorded in accordance with the Securities and Futures Ordinance [15]. - The Board intends to maintain a balance between dividend distribution and adequate cash flow to meet working capital requirements [100]. Corporate Governance and Compliance - The Company has complied with the Corporate Governance Code during the year under review, except for the absence of the chairman at the 2021 AGM due to other business engagements [197]. - The Company has adopted a Securities Dealing Code that applies to all Directors and employees, ensuring compliance throughout the year [199]. - The Board is committed to maintaining high corporate governance standards, which are crucial for future success [195]. - The effectiveness of the Group's internal control and risk management systems has been evaluated by the Board [189]. - The Company has ensured compliance with legal and regulatory requirements throughout the year [189]. Environmental and Sustainability Practices - The Group is committed to complying with all environmental policies and relevant laws, and has an internal laboratory to ensure product quality meets national standards, including food safety standards [10]. - The company recognizes its corporate social responsibility and aims to create value for stakeholders beyond monetary terms, incorporating ESG principles into business operations [108]. - The company is focused on enhancing its research and development capabilities to support sustainable growth [110]. - The company is committed to using water responsibly and has its own reclaimed water treatment facilities to minimize environmental impact [148]. - The Group has implemented a perpetual monitoring system for sewage disposal, reported to local environmental protection bureau [146]. - The Group did not produce any hazardous waste in its production plants during the year [147]. - The Group is committed to using water responsibly and has its own reclaimed water treatment facilities to minimize environmental impact [148]. - The company encourages the use of reusable packaging materials to align with sustainability practices [152]. - The company has not set any specific targets for reducing emissions or waste, primarily due to the variability in product mix and production methods [150]. Employee and Stakeholder Relations - The Group maintains key relationships with major stakeholders, including employees, customers, and suppliers, as outlined in the Environmental and Sustainability Report [9]. - As of December 31, 2021, the Group had approximately 2,326 full-time staff, with total staff costs of approximately RMB229,470,000, an increase from RMB190,457,000 in 2020 [74]. - The male to female employee ratio is 1,932 males to 391 females, indicating a gender distribution of approximately 83% male and 17% female [126]. - The employee turnover rate for males was 6.7% in 2021, an increase from 5.2% in 2020 [126]. - The Group's whistleblowing policy provides a secure reporting channel for suspected misconduct, enhancing accountability [124]. - The company has established trust with suppliers, primarily consisting of farmers, cooperatives, agents, and traders in the PRC [133]. Risk Management - The Risk Review Report provides a comprehensive review of principal risks and uncertainties facing the Group [9]. - The management uses a risk scorecard to rank and compare identified risks, presenting them to the Board for annual review [169]. - The executive management team is responsible for managing risks and ensuring appropriate control procedures are in place [170]. - The Group invested in high-efficiency equipment to effectively reduce energy consumption as part of its commitment to carbon footprint neutralization [174]. - The company is monitoring commodity price movements closely due to the volatility in cornstarch and corn kernel prices, which may lead to significant losses if costs cannot be passed to customers [182]. Research and Development - The management team expects to start trial production of lactic acid and polylactic acid in the second and fourth quarters of 2022 respectively [48]. - The company plans to adjust production plans and product mix in response to market conditions to maintain profitability [57]. - The Group invests significantly in research and development for new products and production methods, aiming to improve production efficiency and control costs [157]. - The Group plans to register its research and development results with the National Intellectual Property Administration in China to protect its innovations [157]. - The company is conducting market research and feasibility studies for potential new product projects to promote innovation [182].

Financial Compliance and Reporting - The condensed consolidated financial statements were reviewed and found to be in compliance with HKAS 34, with no significant issues identified[9]. - The financial statements include the condensed consolidated statement of financial position as of June 30, 2021, and the related profit or loss and other comprehensive income for the six-month period[5]. - The review was conducted in accordance with Hong Kong Standard on Review Engagements 2410, focusing on inquiries and analytical procedures[5]. - The company is responsible for the preparation and presentation of the financial statements, ensuring they meet the relevant provisions of the listing rules[5]. - The report covers the interim financial information for the six-month period ending June 30, 2021, as required by the Hong Kong Stock Exchange[5]. - The review scope was less extensive than a full audit, which limits the assurance obtained[5]. - The financial position and performance metrics for the interim period are detailed in the financial statements, which are included in the report[5]. - The report is intended solely for the board of directors and does not assume responsibility to any other parties[9]. - The company’s financial reporting adheres to the standards set by the Hong Kong Institute of Certified Public Accountants[5]. - The review was completed by SHINEWING (HK) CPA Limited, with the conclusion that the financial statements are materially accurate[9]. Financial Performance - Revenue for the six months ended June 30, 2021, was RMB 5,699,494, an increase of 48.0% compared to RMB 3,850,007 in 2020[11]. - Gross profit for the same period was RMB 393,215, representing a 37.9% increase from RMB 285,199 in 2020[11]. - Operating profit rose to RMB 223,651, up 66.4% from RMB 134,371 in the previous year[11]. - Profit attributable to owners of the company was RMB 149,223, an increase of 45.0% compared to RMB 102,728 in 2020[11]. - Basic and diluted earnings per share for the period were RMB 0.0249, compared to RMB 0.0171 in 2020, reflecting a 45.0% increase[11]. - Profit before income tax for the six months ended June 30, 2021, was RMB 219,715,000, up from RMB 138,928,000 in 2020, reflecting a growth of approximately 58.0%[24][25]. - Profit after taxation rose by 55.5% to approximately RMB 174,707,000[83]. Assets and Liabilities - Total assets as of June 30, 2021, amounted to RMB 4,891,337, a rise from RMB 4,567,492 at the end of 2020[13]. - Current assets increased to RMB 2,400,750, compared to RMB 2,063,831 at the end of 2020, reflecting a growth of 16.3%[13]. - Non-current liabilities totaled RMB 358,698, slightly decreased from RMB 361,851 at the end of 2020[15]. - As of June 30, 2021, total equity amounted to RMB 3,263,899,000, an increase from RMB 3,134,133,000 as of January 1, 2021[17]. - Total trade receivables as of June 30, 2021, were RMB 200,232,000, up from RMB 196,187,000 as of December 31, 2020, showing a growth of about 2%[54]. - The Group's total borrowings as of June 30, 2021, were RMB 398,758,000, a significant increase from RMB 126,849,000 as of December 31, 2020[72]. Cash Flow and Investments - The net cash from operating activities for the six months ended June 30, 2021, was a negative RMB 207,355,000, compared to a positive RMB 141,204,000 in the same period of 2020[19]. - Net cash used in investing activities was RMB 229,600,000 for the six months ended June 30, 2021, up from RMB 126,040,000 in 2020[19]. - Payments for property, plant, and equipment amounted to RMB 221,988,000 for the six months ended June 30, 2021, compared to RMB 170,281,000 in 2020[19]. - The company received government grants totaling RMB 19,900,000 during the six months ended June 30, 2021, compared to RMB 800,000 in 2020[19]. Market and Operational Insights - The company adjusted selling prices to reflect the increase in corn kernel costs due to reduced supply and strong market demand from the pig-farming industry[79]. - Strong demand for lysine products from the pig-farming industry positively impacted the performance of fermented and downstream products[81]. - The business performance of modified starch was stable, and the performance of biobased materials was satisfactory during the review period[82]. - The construction of new lactic acid and polylactic acid production facilities is on track, with trial runs expected in the fourth quarter of this year[77]. - The management team maintains a cautiously optimistic outlook for the second half of 2021, despite facing excessive supply and keen competition in the industry[77]. Corporate Governance and Compliance - The company complied with the Corporate Governance Code, except for the absence of Mr. Tian Qixiang at the 2021 annual general meeting due to other business engagements[137]. - All directors confirmed compliance with the Securities Dealing Code throughout the review period[141]. - The company has adopted a Securities Dealing Code that is no less exacting than the Model Code[141]. - The company is audited by SHINEWING (HK) CPA Limited[144].