China Starch Holdings Limited 中國澱粉控股有限公司 (incorporated in the Cayman Islands with limited liability 於関曼群島註冊成立之有限公司) Stock Code 股份代號 : 3838 INTERIM REPO Contents 目錄 | --- | --- | |------------------------------------------------------------------|------------------------------| | | | | Report on Review of Interim Financial Information | 中期財務資料之審閱報告 | | Condensed Consolidated Statement of Profit or Loss and | 簡明合併損益及其他綜合收益表 | | Other Comprehensive Income | | | Condensed Consolidated Statement of Financial Pos ...

Revenue and Financial Performance - The Group recorded total revenue of approximately RMB 6,750 million in 2019, an increase from RMB 5,073 million in 2018[51]. - Gross profit decreased significantly by 20.3% to approximately RMB 353 million, down from RMB 443 million in 2018[51]. - Profit after taxation decreased significantly to RMB 98 million, compared to RMB 238 million in 2018[52]. - Basic earnings per share was RMB 0.0162, down from RMB 0.0385 per share in 2018[52]. - Revenue from upstream products increased significantly by 49.4% to RMB 5,317 million, with sales volume rising by 39.0%[63][65]. - Revenue from lysine products decreased by 9.5% to approximately RMB 748 million, with an average selling price of RMB 4,953 per tonne[68][69]. - Revenue from starch-based sweeteners was approximately RMB 340 million, with sales volume increasing to 160,868 tonnes[71]. - Revenue from modified starch decreased by 5.6% to RMB 305 million, with export sales accounting for approximately 25.4% of total sales, down from 33.3% in 2018[74]. - Other fermentation and downstream products generated revenue of approximately RMB 39 million, a slight decrease from RMB 41 million in 2018[74]. Dividends and Share Options - The proposed final dividend is HK$0.62 per share for the year ended December 31, 2019, subject to approval at the upcoming AGM[6]. - The Company adopted a Share Option Scheme on May 19, 2017, to incentivize and retain key employees and management[18]. - The maximum number of shares that may be issued upon the exercise of all outstanding options under the Share Option Scheme must not exceed 30% of the number of issued shares[22]. - The total number of shares that may be allotted under the Share Option Scheme must not exceed 10% of the issued shares as of the date of approval[23]. - As of December 31, 2019, no share options had been granted under the Share Option Scheme[33]. Corporate Governance and Compliance - The Directors have confirmed their independence as per the Listing Rules[6]. - The Company has maintained appropriate directors and officers liability insurance for indemnifying losses related to legal actions against its Directors and officers[9]. - The Company has adopted a Securities Dealing Code that applies to all Directors and employees, ensuring compliance with required standards throughout the year[156]. - The Board has overall responsibility for the Group's risk management and internal control systems[134]. - The Company has complied with the Corporate Governance Code during the year under review, except for the absence of the chairman of the Audit Committee at the 2019 AGM[155]. Risk Management - The Risk Review Report provides a comprehensive review of principal risks and uncertainties facing the Group[4]. - Major risks identified include domestic market risk due to oversupply and weak demand for cornstarch, with plans to strengthen credit control and allocate resources for overseas market development[147]. - Financial risks are highlighted, with profit margins being suppressed and the need for bank borrowings to fulfill working capital requirements due to extended recoverable periods for certain customers[149]. - Regulatory risks are increasing as environmental protection-related rules become more stringent, necessitating regular monitoring of changes in laws and regulations[149]. - The management team is responsible for overseeing risk management and ensuring appropriate monitoring procedures are in place[140]. Environmental and Social Responsibility - The Group is committed to complying with all environmental policies and regulations related to its business operations[4]. - The Group emphasizes the importance of employee health and safety as key to long-term success[105]. - The Group prohibits the employment of child and forced labor in all operations[111]. - The Group is committed to using water responsibly and has facilities to minimize reliance on underground water[128]. - The environmental strategy focuses on balancing production costs with greenhouse gas emissions and sewage disposal[126]. Production and Operational Efficiency - The Group's production activities are primarily carried out in the People's Republic of China[4]. - The production capacity of cornstarch is expected to increase to 2,400,000 tonnes and lysine to 300,000 tonnes upon completion of new facilities[45]. - The Group is committed to improving production efficiency through modernized production facilities, with long-term investments expected to yield payback over time[121]. - The Group's research and development efforts are aimed at improving production efficiency and controlling costs effectively[127]. Employee Relations and Development - The Company is committed to attracting and retaining valuable human resources through the Share Option Scheme[18]. - Total staff costs, including Directors' emoluments, were approximately RMB 208 million in 2019, compared to RMB 183 million in 2018, with the workforce increasing to about 2,300 employees[83]. - Continuous professional development is recognized as essential for Directors to stay updated on current trends and issues[176]. - Major training events included fire prevention drills, hazardous chemical leaking drills, and occupational disease prevention training[110].

China Starch Holdings Limited 中國澱粉控股有限公司 (incorporated in the Cayman Islands with limited liability 於開曼群島註冊成立之有限公司) Stock Code 股份代號 : 3838 2019 INTERIM REPORT 中期報告 Contents 目錄 | --- | --- | |------------------------------------------------------------------|------------------------------| | | | | Report on Review of Interim Financial Information | 中期財務資料之審閱報告 | | Condensed Consolidated Statement of Profit or Loss and | 簡明合併損益及其他綜合收益表 | | Other Comprehensive Income | | | Condensed Consolidated Statement of F ...

Financial Performance - The Group recorded total revenue of approximately RMB5,073 million, an increase from RMB4,695 million in 2017, representing a growth of 8.1%[58]. - Gross profit decreased significantly by 28.5% to approximately RMB443 million, down from RMB620 million in 2017[58]. - Profit after taxation decreased to RMB238 million, compared to RMB394 million in 2017, reflecting a decline of 39.6%[59]. - Revenue from upstream products increased by 12.0% to RMB3,558.9 million, with a sales volume of cornstarch rising to approximately 1,153,848 tonnes[60][62]. - Revenue from fermented and downstream products slightly decreased to RMB1,514.6 million, down from RMB1,517.2 million in 2017[66]. - Revenue from starch-based sweetener increased by 18.7% to approximately RMB322.7 million, with an average selling price of RMB2,105 per tonne[68][70]. - Revenue from modified starch increased by 17.4% to RMB323.5 million, with export sales percentage rising to about 33.3%[68][71]. Business Operations - 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[6]. - The Company’s principal activity is investment holding, with subsidiaries engaged in manufacturing and selling cornstarch, lysine, and starch-based products[8]. - The Group's production activities are primarily located in the PRC, highlighting its operational focus in this region[8]. - The production capacity of cornstarch and lysine is expected to increase to 2,400,000 tonnes and 300,000 tonnes per annum respectively upon the completion of the Golden Corn Biotech production base by the end of 2019[45]. - The construction of the production base for Golden Corn Biotech is slightly behind schedule but is still targeted for operation by the end of 2019[45]. 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[6]. - The Group's environmental and sustainability report reviews compliance with laws and regulations impacting the business and relationships with stakeholders[6]. - The environmental and sustainability report complies with the "Environmental, Social and Governance Reporting Guide" of the Hong Kong Stock Exchange[105][114]. - The company has implemented a perpetual monitoring system for sewage disposal, which is reported to local environmental protection authorities[165]. - The company did not produce any hazardous waste in its production plants during the review year, and most non-hazardous waste is sold to third parties[165]. - There were no significant incidents of non-compliance with environmental laws during the review year, reflecting the company's commitment to environmental standards[165]. Corporate Governance and Compliance - The Board recommends a final dividend of HK1.20 cents per share for the year ended 31 December 2018, pending approval at the upcoming annual general meeting[9]. - The related party transactions for the year ended 31 December 2018 did not constitute connected transactions as defined under the Listing Rules[6]. - The company has complied with the Corporate Governance Code during the year under review, except for the absence of the chairman at the annual general meeting[194]. - The company has adopted a Securities Dealing Code that applies to all directors and relevant employees, ensuring compliance throughout the year[195]. - The board considers the internal control system effective and adequate for financial reporting and compliance with listing rules as of December 31, 2018[191]. Risk Management - The Group has implemented a strong balance sheet and sufficient banking facilities to mitigate domestic market risks[186]. - The Group utilizes a risk scorecard to rank and compare identified risks and their impacts, presenting this information to the Board effectively[184]. - The board evaluates the effectiveness of the company's internal control and risk management systems[197]. - The frequency of production output limitations may increase in the future due to regional gas pollutant benchmarks set by local government[186]. Employee and Stakeholder Relations - The Company recognizes the importance of employee health and safety as a priority[116]. - The company provided major training events including fire prevention drills and hazardous chemical leaking drills to enhance employee safety[126]. - The company strictly complies with PRC Labour Law and prohibits child and forced labor, promoting fair treatment in recruitment, compensation, and working conditions[127]. - The Group's sustainability is dependent on relationships with stakeholders, balancing financial performance with social and environmental responsibilities[115][117]. - The company has developed trust with suppliers, utilizing mobile technology for transparent corn kernel pricing and efficient procurement processes[155]. Shareholder Information - As of December 31, 2018, the Company's distributable reserves amounted to approximately RMB 156,291,000, including a share premium of approximately RMB 39,369,000[98][102]. - The Board intends to balance dividend distribution with adequate cash flow and reserves, with no assurance of specific dividend payments in any given period[99][103]. - The Group's public float is maintained at not less than 25% of the total issued shares as required under the Listing Rules[43].