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]

[Company Information and Preliminary Results](index=1&type=section&id=Company%20Information%20and%20Preliminary%20Results) This section presents the company's preliminary audited consolidated results for 2022, highlighting revenue growth, increased profitability, and stable earnings per share and proposed dividends [Announcement Statement](index=1&type=section&id=Announcement%20Statement) The Board of China Starch Holdings Limited announced its audited consolidated results for the year ended December 31, 2022, with the Hong Kong Exchange disclaiming responsibility for the announcement's content - The company's Board of Directors announced the audited consolidated results for the year ended December 31, 2022[43](index=43&type=chunk) - Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited assume no responsibility for the contents of this announcement, making no representation as to its accuracy or completeness[57](index=57&type=chunk) [Preliminary Annual Results Overview](index=1&type=section&id=Preliminary%20Annual%20Results%20Overview) The company's FY2022 revenue grew 2.7% to **RMB 11,948,852 thousand**, with gross profit up 25.0%, operating profit and profit for the year also significantly increasing, while basic earnings per share and proposed final dividend remained stable FY2022 Key Financial Data Overview | Metric | 2022 (RMB '000) | 2021 (RMB '000) | Change | | :------------------------------- | :-------------- | :-------------- | :----- | | Revenue | 11,948,852 | 11,639,315 | +2.7% | | Gross Profit | 1,190,475 | 952,211 | +25.0% | | Operating Profit | 607,326 | 510,539 | +19.0% | | Profit for the Year | 495,432 | 402,830 | +23.0% | | Profit Attributable to Owners | 352,009 | 345,597 | +1.9% | | Basic Earnings Per Share (RMB) | 0.0587 | 0.0577 | +1.7% | | Proposed Final Dividend Per Share (HK cents) | 0.69 | 0.69 | – | [Consolidated Financial Statements](index=2&type=section&id=Consolidated%20Financial%20Statements) This section details the company's consolidated financial performance and position for 2022, showing revenue and profit growth, changes in assets and liabilities, and significant increases in research expenses and borrowings [Consolidated Statement of Profit or Loss and Other Comprehensive Income](index=2&type=section&id=Consolidated%20Statement%20of%20Profit%20or%20Loss%20and%20Other%20Comprehensive%20Income) For the year ended December 31, 2022, the company's revenue increased by 2.7% to **RMB 11,948,852 thousand**, gross profit grew 25.0% to **RMB 1,190,475 thousand**, with significant increases in operating profit and profit for the year, despite a substantial rise in research expenses Consolidated Statement of Profit or Loss and Other Comprehensive Income Summary | Metric | 2022 (RMB '000) | 2021 (RMB '000) | | :--------------------------------------- | :-------------- | :-------------- | | Revenue | 11,948,852 | 11,639,315 | | Cost of Sales | (10,758,377) | (10,687,104) | | Gross Profit | 1,190,475 | 952,211 | | Distribution Expenses | (171,044) | (164,934) | | Administrative Expenses | (207,835) | (192,013) | | Research Expenses | (324,108) | (199,648) | | Other Net Income | 119,838 | 114,923 | | Operating Profit | 607,326 | 510,539 | | Profit Before Income Tax | 621,116 | 511,488 | | Income Tax Expense | (125,684) | (108,658) | | Profit and Total Comprehensive Income for the Year | 495,432 | 402,830 | | Attributable to Owners of the Company | 352,009 | 345,597 | | Non-controlling Interests | 143,423 | 57,233 | - Research expenses significantly increased from **RMB 199,648 thousand** in 2021 to **RMB 324,108 thousand** in 2022[59](index=59&type=chunk) [Consolidated Statement of Financial Position](index=3&type=section&id=Consolidated%20Statement%20of%20Financial%20Position) As of December 31, 2022, total assets increased to **RMB 5,105,848 thousand**, driven by higher inventories and cash and cash equivalents, with total equity also growing, while current liabilities saw significant increases in borrowings and dividends payable Consolidated Statement of Financial Position Summary (Assets) | Metric | 2022 (RMB '000) | 2021 (RMB '000) | | :--------------------------- | :-------------- | :-------------- | | **Non-current Assets** | | | | Property, Plant and Equipment | 1,892,095 | 2,004,318 | | Right-of-use Assets | 436,292 | 447,167 | | Deferred Tax Assets | 61,999 | 50,907 | | Total Non-current Assets | 2,439,327 | 2,521,511 | | **Current Assets** | | | | Inventories | 866,404 | 602,314 | | Trade and Other Receivables | 589,550 | 594,357 | | Pledged Bank Deposits | 207,582 | – | | Cash and Cash Equivalents | 1,002,985 | 1,000,977 | | Total Current Assets | 2,666,521 | 2,197,648 | | **Total Assets** | 5,105,848 | 4,719,159 | Consolidated Statement of Financial Position Summary (Liabilities and Equity) | Metric | 2022 (RMB '000) | 2021 (RMB '000) | | :------------------------------- | :-------------- | :-------------- | | **Equity** | | | | Equity Attributable to Owners of the Company | 3,595,090 | 3,277,963 | | Non-controlling Interests | 226,693 | 214,059 | | Total Equity | 3,821,783 | 3,492,022 | | **Non-current Liabilities** | | | | Deferred Income | 244,722 | 259,411 | | Deferred Tax Liabilities | 73,410 | 70,554 | | Borrowings | – | 3,000 | | Total Non-current Liabilities | 318,132 | 332,965 | | **Current Liabilities** | | | | Trade and Other Payables | 369,149 | 416,302 | | Customer Advances | 205,166 | 269,909 | | Borrowings | 285,925 | 108,176 | | Dividends Payable | 27,307 | – | | Total Current Liabilities | 965,933 | 894,172 | | **Total Liabilities** | 1,284,065 | 1,227,137 | | **Total Equity and Liabilities** | 5,105,848 | 4,719,159 | - Pledged bank deposits amounted to **RMB 207,582 thousand** in 2022, compared to zero in 2021[47](index=47&type=chunk) - Current liabilities borrowings significantly increased from **RMB 108,176 thousand** in 2021 to **RMB 285,925 thousand** in 2022[48](index=48&type=chunk) [Notes to the Financial Statements](index=5&type=section&id=Notes%20to%20the%20Financial%20Statements) This section provides detailed notes on the consolidated financial statements, covering accounting policies, segment information, other net income, expenses, income tax, earnings per share, dividends, receivables, payables, and post-reporting period events [Basis of Preparation and Accounting Policies](index=5&type=section&id=Basis%20of%20Preparation%20and%20Accounting%20Policies) The consolidated financial statements are prepared in accordance with applicable Hong Kong Financial Reporting Standards, adopting new standard amendments effective from January 1, 2022, which had no significant impact on performance or financial position - The consolidated financial statements are prepared in accordance with all applicable Hong Kong Financial Reporting Standards issued by the Hong Kong Institute of Certified Public Accountants[51](index=51&type=chunk) - New standard amendments effective for accounting periods beginning on or after January 1, 2022, have been adopted, including amendments to HKFRS 3, HKAS 16, HKAS 37, and HKFRS 16[50](index=50&type=chunk)[52](index=52&type=chunk)[64](index=64&type=chunk)[67](index=67&type=chunk)[80](index=80&type=chunk) - The adoption of these amendments had no impact on the Group's performance or financial position[67](index=67&type=chunk) [Revenue and Segment Information](index=6&type=section&id=Revenue%20and%20Segment%20Information) Company revenue primarily originates from China, with all revenue recognized at a single point in time; 2022 saw increased sales to external customers for both upstream products (**RMB 8,705,998 thousand**) and fermentation and downstream products (**RMB 3,242,854 thousand**) - All revenue streams are recognized at a single point in time[55](index=55&type=chunk) - The Group's assets, liabilities, and capital expenditures are predominantly from China, thus no geographical analysis is presented[56](index=56&type=chunk) 2022 Revenue and Profit by Segment | Segment | Sales to External Customers (RMB '000) | Inter-segment Sales (RMB '000) | Reportable Segment Profit (RMB '000) | | :--------------------------- | :----------------------------------- | :----------------------------- | :----------------------------------- | | Upstream Products | 8,705,998 | 1,485,860 | 230,169 | | Fermentation and Downstream Products | 3,242,854 | – | 396,677 | | Total | 11,948,852 | 1,485,860 | 626,846 | 2021 Revenue and Profit by Segment | Segment | Sales to External Customers (RMB '000) | Inter-segment Sales (RMB '000) | Reportable Segment Performance (RMB '000) | | :--------------------------- | :----------------------------------- | :----------------------------- | :---------------------------------------- | | Upstream Products | 8,576,482 | 220,091 | 442,997 | | Fermentation and Downstream Products | 3,062,833 | – | 333,072 | | Total | 11,639,315 | 220,091 | 776,069 | [Other Net Income](index=8&type=section&id=Other%20Net%20Income) Other net income increased to **RMB 119,838 thousand** in 2022, primarily due to higher amortization of government grants, gains from scrap sales, and disposal of property, plant, and equipment, despite a significant reduction in one-off government grants Other Net Income Details | Item | 2022 (RMB '000) | 2021 (RMB '000) | | :------------------------------------- | :-------------- | :-------------- | | Amortization of Government Grants | 81,766 | 62,925 | | Gain on Sales of Scrap Materials | 21,841 | 17,317 | | Gain on Disposal of Property, Plant and Equipment | 9,403 | 1,075 | | Write-off of Property, Plant and Equipment | (208) | (3,091) | | Sewage Treatment | 2,875 | 1,224 | | Net Exchange Gain/(Loss) | 1,538 | (1,958) | | Government Grants (One-off) | 1,185 | 36,496 | | Futures Income | 601 | 333 | | Others | 837 | 602 | | **Total** | 119,838 | 114,923 | - One-off government grants significantly decreased to **RMB 1,185 thousand** in 2022, from **RMB 36,496 thousand** in 2021[70](index=70&type=chunk)[82](index=82&type=chunk) [Profit Before Income Tax](index=8&type=section&id=Profit%20Before%20Income%20Tax) The company's main expenses include cost of inventories, salaries, depreciation, and research expenses; research expenses significantly increased in 2022, while cost of inventories slightly decreased Key Expense Details | Item | 2022 (RMB '000) | 2021 (RMB '000) | | :--------------------------------- | :-------------- | :-------------- | | Cost of Inventories | 10,555,375 | 10,747,155 | | Salaries, Wages and Other Benefits | 251,116 | 215,122 | | Pension Scheme Contributions | 15,063 | 14,348 | | Depreciation of Property, Plant and Equipment | 273,929 | 248,296 | | Depreciation of Right-of-use Assets | 10,875 | 10,954 | | Research Expenses | 324,108 | 199,648 | | Auditor's Remuneration - Audit Services | 1,054 | 785 | | Auditor's Remuneration - Non-audit Services | 195 | 245 | - Research expenses significantly increased, primarily comprising inventory costs, staff costs, and depreciation for the R&D department[72](index=72&type=chunk)[83](index=83&type=chunk) [Income Tax Expense](index=9&type=section&id=Income%20Tax%20Expense) Income tax expense increased to **RMB 125,684 thousand** in 2022, mainly due to higher PRC corporate income tax, partially offset by over-provision from prior years; key PRC entities are subject to a 25% tax rate, with high-tech enterprises enjoying a preferential 15% rate Income Tax Expense Details | Item | 2022 (RMB '000) | 2021 (RMB '000) | | :--------------------------- | :-------------- | :-------------- | | Current Income Tax | | | | －PRC Corporate Income Tax | 139,076 | 90,720 | | －Over-provision in Prior Years | (5,156) | (7,763) | | －Other PRC Withholding Tax | – | 135 | | Deferred Tax | (8,236) | 25,566 | | **Total** | 125,684 | 108,658 | - PRC subsidiaries are subject to a **25%** corporate income tax rate, with recognized high-tech enterprises enjoying a preferential rate of **15%**[74](index=74&type=chunk) - Dividends paid by PRC enterprises to non-PRC resident enterprises are subject to a withholding tax rate of **10%**[85](index=85&type=chunk) [Earnings Per Share](index=10&type=section&id=Earnings%20Per%20Share) Basic earnings per share attributable to owners increased slightly to **RMB 0.0587** in 2022 from **RMB 0.0577** in 2021, with basic and diluted earnings per share being identical due to the absence of dilutive potential ordinary shares Earnings Per Share Calculation | Item | 2022 | 2021 | | :--------------------------------------- | :---------- | :---------- | | Profit Attributable to Owners of the Company (RMB '000) | 352,009 | 345,597 | | Weighted Average Number of Ordinary Shares in Issue ('000 shares) | 5,994,132 | 5,994,132 | | Basic Earnings Per Share (RMB) | 0.0587 | 0.0577 | - Basic and diluted earnings per share are identical for both years due to the absence of dilutive potential ordinary shares[87](index=87&type=chunk) [Dividends](index=10&type=section&id=Dividends) The Board proposed a final dividend of **HK 0.69 cents** per share for 2022, consistent with 2021, totaling **HKD 41,360,000**, subject to shareholder approval at the AGM - The Board proposed a final dividend of **HK 0.69 cents** per share for 2022, amounting to **HKD 41,360,000**, consistent with 2021[58](index=58&type=chunk)[89](index=89&type=chunk) - The proposed dividend is subject to approval by the company's shareholders at the 2023 Annual General Meeting[22](index=22&type=chunk)[89](index=89&type=chunk) Dividends Payable for Prior Financial Years | Item | 2022 (RMB '000) | 2021 (RMB '000) | | :--------------------------------- | :-------------- | :-------------- | | 2021 Final Dividend of HK 0.69 cents per share | 34,882 | 44,941 | [Trade and Other Receivables](index=11&type=section&id=Trade%20and%20Other%20Receivables) Total trade receivables in 2022 were **RMB 145,594 thousand**, slightly lower than 2021, with customer credit terms ranging from zero to 150 days; bank acceptance bills increased to **RMB 239,531 thousand**, with some pledged as collateral for bills payable and bank borrowings Trade and Other Receivables Details | Item | 2022 (RMB '000) | 2021 (RMB '000) | | :---------------------------- | :-------------- | :-------------- | | Trade Receivables | 145,594 | 147,249 | | Bank Acceptance Bills | 239,531 | 204,407 | | Prepayments and Other Tax Receivables | 195,490 | 235,078 | | Others | 8,935 | 7,623 | | **Total** | 589,550 | 594,357 | - The Group generally grants credit terms to customers ranging from zero to 150 days[76](index=76&type=chunk) Trade Receivables Ageing Analysis | Ageing | 2022 (RMB '000) | 2021 (RMB '000) | | :------------ | :-------------- | :-------------- | | 0-30 Days | 134,162 | 136,162 | | 31-60 Days | 5,391 | 6,361 | | 61-90 Days | 1,022 | 2,927 | | Over 90 Days | 5,019 | 1,799 | | **Total** | 145,594 | 147,249 | Bank Acceptance Bills Details | Item | 2022 (RMB '000) | 2021 (RMB '000) | | :-------------- | :-------------- | :-------------- | | Bills on Hand | 131,039 | 124,599 | | Endorsed Bills | 48,792 | 79,808 | | Discounted Bills | 59,700 | – | | **Total** | 239,531 | 204,407 | - As of December 31, 2022, bank acceptance bills of **RMB 7,530 thousand** and discounted bills of **RMB 59,700 thousand** were pledged to banks[78](index=78&type=chunk) [Trade and Other Payables](index=13&type=section&id=Trade%20and%20Other%20Payables) Total trade and other payables decreased to **RMB 369,149 thousand** in 2022; the average credit period for purchases remained at 80 days, with the company implementing risk management policies to ensure timely payments Trade and Other Payables Details | Item | 2022 (RMB '000) | 2021 (RMB '000) | | :--------------------------------- | :-------------- | :-------------- | | Trade Payables | 188,973 | 187,347 | | Bills Payable | 7,530 | 8,428 | | Payables for Construction and Equipment | 64,653 | 91,715 | | Accrued Salaries and Benefits | 33,843 | 25,652 | | Accrued Expenses | 31,949 | 53,300 | | Other Tax Payables | 12,464 | 18,072 | | **Total** | 369,149 | 416,302 | - The average credit period for purchases was **80 days**, consistent with 2021[5](index=5&type=chunk) Trade Payables and Bills Payable Ageing Analysis | Ageing | 2022 (RMB '000) | 2021 (RMB '000) | | :------------ | :-------------- | :-------------- | | 0-60 Days | 163,355 | 117,635 | | 61-90 Days | 2,558 | 28,764 | | Over 90 Days | 30,590 | 49,376 | | **Total** | 196,503 | 195,775 | [Events After the Reporting Period](index=14&type=section&id=Events%20After%20the%20Reporting%20Period) Subsequent to the reporting period, the company acquired a **2%** equity stake in Shandong Juneng Thermal Power Development Co., Ltd. for **RMB 11,280 thousand** in December 2022, completed in January 2023, to secure power and steam supply for its Shouguang production facilities - The company signed an agreement in December 2022 to acquire a **2%** equity stake in Shandong Juneng Thermal Power Development Co., Ltd. for **RMB 11,280 thousand**[95](index=95&type=chunk) - Juneng Thermal Power is the Group's power and steam supplier for its Shouguang production facilities, and this acquisition aims to secure supply[95](index=95&type=chunk) - The equity transfer and payment of consideration were completed on January 9, 2023[95](index=95&type=chunk) [Management Discussion and Analysis](index=15&type=section&id=Management%20Discussion%20and%20Analysis) This section offers management's perspective on the company's 2022 performance, business developments, financial results, liquidity, and capital structure, including strategic plans for capacity expansion and product diversification [Overview](index=15&type=section&id=Overview) 2022 was a turbulent year with COVID-19 lockdowns impacting industries and logistics, yet the company's value chain operated continuously; China's lifting of the dynamic zero-COVID policy in December 2022 is expected to unleash market demand and supply, though the company remains cautious about 2023 business performance - COVID-19 lockdown measures in 2022 affected various industries and logistics, but the company's value chain operated continuously[6](index=6&type=chunk)[96](index=96&type=chunk) - China lifted its dynamic zero-COVID policy in December 2022, expecting a release of both market demand and supply[7](index=7&type=chunk) - The company holds a cautious view on its 2023 business performance, anticipating intensified market competition[7](index=7&type=chunk) - The company benefited from strong demand driven by the recovery of the animal feed and aquaculture markets, with excellent sales performance in corn protein powder, corn fiber, and lysine[149](index=149&type=chunk) [Business Development](index=16&type=section&id=Business%20Development) The company is committed to developing corn-derived products, planning to increase lysine annual production capacity from **300,000 tons** to **500,000 tons** by end-2023 to reduce costs and refine product categories, and will establish a **20,000-ton** lactic acid ester facility by end-2024 with a joint venture partner, alongside a **5,000-ton** pilot line for lactide and polylactic acid - The company plans to increase the annual production capacity of lysine products from **300,000 tons** to **500,000 tons** by the end of 2023, aiming to reduce production costs and refine product categories[9](index=9&type=chunk) - A joint venture with Musashino Chemical Laboratory, Ltd. aims to establish a lactic acid ester production facility with an annual capacity of **20,000 tons** by the end of 2024[10](index=10&type=chunk) - The company will establish pilot production lines for lactide and polylactic acid, each with an annual capacity of **5,000 tons**, expected to be completed by the end of 2023[98](index=98&type=chunk) - The company intends to fund these three initiatives using internal resources[99](index=99&type=chunk) - The lactic acid pilot production line was completed in May 2022 and transitioned to normal production in December 2022 as planned, with an annual capacity of **20,000 tons**[112](index=112&type=chunk) [Business Review](index=16&type=section&id=Business%20Review) In 2022, upstream product revenue slightly increased but gross margin declined due to stagnant corn starch demand and higher utility costs; fermentation and downstream product revenue rose, with satisfactory lysine sales, but modified starch sales significantly dropped, while starch sugar achieved sales growth through product mix adjustments [Upstream Products](index=16&type=section&id=Upstream%20Products) Upstream product revenue slightly increased by **1.5%** to **RMB 8,705,998 thousand** in 2022, but gross margin decreased by **0.7 percentage points** to **5.1%**, primarily due to stagnant corn starch demand and higher utility expenses, with average selling price of corn starch decreasing while sales volume increased - Upstream product revenue slightly increased by **1.5%** to **RMB 8,705,998 thousand**[27](index=27&type=chunk) - The gross margin for this business segment decreased by **0.7 percentage points** to **5.1%**[27](index=27&type=chunk) - Primarily impacted by stagnant corn starch demand and increased utility expenses in the second half of 2022[27](index=27&type=chunk) Upstream Products Key Data | Metric | 2022 (RMB '000/RMB/ton) | 2021 (RMB '000/RMB/ton) | | :-------------------------- | :---------------------- | :---------------------- | | Revenue | 8,705,998 | 8,576,482 | | Gross Profit | 441,715 | 496,351 | | Gross Margin | 5.1% | 5.8% | | Average Selling Price of Corn Starch | 2,872 | 2,988 | | Sales Volume of Corn Starch (tons) | 1,953,563 | 1,915,794 | - Rising international soybean prices drove up prices for soybean by-products and corn derivatives, partially offsetting the negative impact of reduced corn starch demand[11](index=11&type=chunk) [Fermentation and Downstream Products](index=17&type=section&id=Fermentation%20and%20Downstream%20Products) Fermentation and downstream product revenue increased to **RMB 3,242,854 thousand**; lysine sales performed satisfactorily with revenue growth and higher average selling prices despite slightly lower volumes; starch sugar achieved sales growth by increasing volume to offset lower average selling prices; modified starch revenue declined due to reduced production and sales from wastewater treatment measures; other fermentation products saw significant revenue growth from increased bio-based material production - Fermentation and downstream product revenue increased to **RMB 3,242,854 thousand**[102](index=102&type=chunk) Fermentation and Downstream Products Revenue Details | Product | 2022 (RMB '000) | 2021 (RMB '000) | | :------------- | :-------------- | :-------------- | | Lysine | 2,424,684 | 2,224,230 | | Starch Sugar | 541,364 | 519,544 | | Modified Starch | 196,006 | 267,463 | | Others | 80,800 | 51,596 | | **Total** | 3,242,854 | 3,062,833 | - Lysine revenue grew, with average selling price rising to **RMB 7,718 per ton**, but total sales volume slightly decreased to **314,179 tons** due to logistics issues[115](index=115&type=chunk)[136](index=136&type=chunk) - Starch sugar revenue increased, with average selling price decreasing to **RMB 2,277 per ton**, but sales volume increased to **237,718 tons**, driven by a higher proportion of liquid starch sugar[121](index=121&type=chunk) - Modified starch revenue decreased, primarily due to reduced production and sales volumes resulting from wastewater treatment measures[28](index=28&type=chunk)[116](index=116&type=chunk) - Other fermentation product revenue significantly increased by **56.6%** to **RMB 80,800 thousand**, mainly benefiting from the gradual increase in bio-based material production[137](index=137&type=chunk) [Financial Performance](index=17&type=section&id=Financial%20Performance) In 2022, the company achieved significant growth in total revenue and gross profit, with an improved gross margin, maintaining profitability through cost control, product mix adjustments, and optimized production plans; distribution and administrative expenses increased, while research expenses rose substantially, reflecting investments in new product development and production process transformation - Total revenue was approximately **RMB 11,948,852 thousand**, with gross profit significantly increasing by **25.0%** to approximately **RMB 1,190,475 thousand**[151](index=151&type=chunk) Gross Profit and Gross Margin | Metric | 2022 (RMB '000) | 2021 (RMB '000) | | :--------- | :-------------- | :-------------- | | Gross Profit | 748,760 | 455,860 | | Gross Margin | 23.1% | 14.9% | - The company strengthened cost control, promoted the use of liquid starch sugar, and adjusted its product portfolio and production plans to achieve economies of scale[123](index=123&type=chunk) [Cost of Sales and Gross Profit](index=19&type=section&id=Cost%20of%20Sales%20and%20Gross%20Profit) Total cost of sales slightly increased in 2022, with average corn kernel cost remaining stable; electricity and steam costs rose significantly due to unit price adjustments, increasing their proportion of total cost of sales; the company achieved significant gross profit growth through cost control and product mix optimization - Total cost of sales increased to **RMB 10,758,377 thousand**[29](index=29&type=chunk) - Average corn kernel cost remained stable at **RMB 2,550 per ton**[29](index=29&type=chunk) - Electricity and steam costs significantly increased, rising to **7.9%** of total cost of sales (2021: **5.5%**)[29](index=29&type=chunk) - Gross profit increased to **RMB 1,190,475 thousand**[123](index=123&type=chunk) [Distribution and Administrative Expenses](index=20&type=section&id=Distribution%20and%20Administrative%20Expenses) Distribution expenses increased to **RMB 171,044 thousand** in 2022, with the company controlling delivery costs by promoting bulk transportation and encouraging customer self-pickup; administrative expenses rose to **RMB 207,835 thousand**, mainly due to higher staff costs, government levies, and additional maintenance for staff accommodation insulation Distribution Expenses Details | Item | 2022 (RMB '000) | 2021 (RMB '000) | | :-------------------- | :-------------- | :-------------- | | Delivery and Logistics | 141,651 | 138,173 | | Marketing Expenses | 14,989 | 14,450 | | Staff Costs | 8,335 | 7,173 | | Others | 6,069 | 5,138 | | **Total** | 171,044 | 164,934 | - The company controlled delivery costs by promoting bulk transportation and encouraging customers to pick up goods directly from warehouses[30](index=30&type=chunk) Administrative Expenses Details | Item | 2022 (RMB '000) | 2021 (RMB '000) | | :---------------------------- | :-------------- | :-------------- | | Staff Costs | 108,655 | 101,312 | | Depreciation and Amortization Expenses | 32,147 | 37,371 | | Government Levies | 31,094 | 22,657 | | Others | 35,939 | 30,673 | | **Total** | 207,835 | 192,013 | - The increase in administrative expenses was mainly due to higher staff costs and government levies, as well as additional maintenance costs for the insulation of staff accommodation exterior walls[141](index=141&type=chunk) [Research Expenses](index=21&type=section&id=Research%20Expenses) Research expenses significantly increased to **RMB 324,108 thousand** in 2022, primarily allocated to feasibility studies and development of new products, as well as transformation of production methods or processes - Research expenses significantly increased from **RMB 199,648 thousand** to **RMB 324,108 thousand**[125](index=125&type=chunk) - Research projects include feasibility studies and development of new products, as well as transformation of production methods or development of new production processes[125](index=125&type=chunk) [Other Net Income](index=22&type=section&id=Other%20Net%20Income) Other net income increased to **RMB 119,838 thousand** in 2022, primarily contributed by amortization of government grants, gains from scrap sales, and disposal of property, plant, and equipment Other Net Income Details | Item | 2022 (RMB '000) | 2021 (RMB '000) | | :------------------------------------- | :-------------- | :-------------- | | Amortization of Government Grants | 81,766 | 62,925 | | Gain on Sales of Scrap Materials | 21,841 | 17,317 | | Gain on Disposal of Property, Plant and Equipment | 9,403 | 1,075 | | Write-off of Property, Plant and Equipment | (208) | (3,091) | | Sewage Treatment | 2,875 | 1,224 | | Net Exchange Gain/(Loss) | 1,538 | (1,958) | | Government Grants (One-off) | 1,185 | 36,496 | | Futures Income | 601 | 333 | | Others | 837 | 602 | | **Total** | 119,838 | 114,923 | - Other net income increased to **RMB 119,838 thousand**[142](index=142&type=chunk) [Liquidity, Financial Resources and Capital Structure](index=23&type=section&id=Liquidity%2C%20Financial%20Resources%20and%20Capital%20Structure) In 2022, the company's current and quick ratios improved, but the gearing ratio significantly rose to **5.6%** due to increased borrowings for working capital needs, while total shareholder return substantially decreased; the company has sufficient working capital, with all borrowings being short-term Key Financial Performance Indicators | Metric | Unit | 2022 | 2021 | | :------------------------- | :--- | :--- | :--- | | Trade Receivables Turnover | Days | 11 | 14 | | Trade Payables Turnover | Days | 7 | 7 | | Inventory Turnover | Days | 25 | 24 | | Current Ratio | Times | 2.8 | 2.5 | | Quick Ratio | Times | 1.9 | 1.8 | | Gearing Ratio | % | 5.6 | 2.4 | | Total Shareholder Return | % | 9.4 | 41.7 | - The gearing ratio, calculated as borrowings divided by total assets, significantly increased to **5.6%** in 2022[20](index=20&type=chunk)[127](index=127&type=chunk) - Total shareholder return, including share price appreciation and dividends paid, significantly decreased to **9.4%** in 2022[33](index=33&type=chunk)[127](index=127&type=chunk) - The Group has sufficient working capital to meet its current needs, with all borrowings being short-term[143](index=143&type=chunk) - As of December 31, 2022, the company provided deposits of **RMB 207,582 thousand** and bank acceptance bills of **RMB 67,230 thousand** as collateral for bank credit and bills payable[128](index=128&type=chunk) [Distributable Reserves and Dividends](index=24&type=section&id=Distributable%20Reserves%20and%20Dividends) As of December 31, 2022, the company's distributable reserves to shareholders were approximately **RMB 128,331 thousand**; the Board proposed a final dividend of **HK 0.69 cents** per share, subject to shareholder approval at the AGM - As of December 31, 2022, the company's distributable reserves to shareholders were approximately **RMB 128,331 thousand**[130](index=130&type=chunk) - The Board proposed a final dividend of **HK 0.69 cents** per share for the year ended December 31, 2022[22](index=22&type=chunk) - The proposed dividend is subject to approval by the company's shareholders at the 2023 Annual General Meeting[22](index=22&type=chunk) [Contingent Liabilities](index=24&type=section&id=Contingent%20Liabilities) As of December 31, 2022, the company had no significant contingent liabilities - As of December 31, 2022, the Group had no significant contingent liabilities[145](index=145&type=chunk) [Corporate Governance and Other Information](index=25&type=section&id=Corporate%20Governance%20and%20Other%20Information) This section outlines the company's adherence to corporate governance standards, policies for directors' securities transactions, auditor's scope, board composition, upcoming AGM details, and annual report publication [Corporate Governance](index=25&type=section&id=Corporate%20Governance) The company complied with the Corporate Governance Code in Appendix 14 of the Listing Rules, applying its principles for high governance standards, except for the Chairman Mr. Tian Qixiang's absence from the 2022 AGM due to other business matters - The company complied with the applicable code provisions of the Corporate Governance Code set out in Appendix 14 to the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited[24](index=24&type=chunk) - Mr. Tian Qixiang, the Chairman of the Board, did not attend the 2022 Annual General Meeting due to other business matters[24](index=24&type=chunk) [Standard Code for Securities Transactions by Directors](index=25&type=section&id=Standard%20Code%20for%20Securities%20Transactions%20by%20Directors) The company adopted its own code for securities dealings, no less stringent than the Model Code in Appendix 10 of the Listing Rules, applicable to all directors and notified employees, with all directors confirming compliance during the review year - The company adopted its own code for securities dealings, with terms no less stringent than the Model Code set out in Appendix 10 of the Listing Rules[153](index=153&type=chunk) - The dealing code applies to all directors and all employees notified to comply with its provisions[153](index=153&type=chunk) - All directors confirmed their compliance with the required standards set out in the dealing code throughout the review year[153](index=153&type=chunk) [Auditor's Scope of Work](index=25&type=section&id=Auditor%27s%20Scope%20of%20Work) The consolidated statement of financial position, consolidated statement of profit or loss and other comprehensive income, and related notes in this announcement align with the audited consolidated financial statements, as agreed by the Group's auditor, Shinewing (HK) CPA Limited, who provided no assurance opinion on this announcement - The figures in the consolidated statement of financial position, consolidated statement of profit or loss and other comprehensive income, and related notes in this announcement are consistent with the amounts in the Group's audited consolidated financial statements for the year[133](index=133&type=chunk) - The work performed by Shinewing (HK) CPA Limited on the aforementioned scope does not constitute an assurance engagement, and thus no assurance opinion is expressed on this announcement[133](index=133&type=chunk) [Review of Annual Results and Board of Directors](index=26&type=section&id=Review%20of%20Annual%20Results%20and%20Board%20of%20Directors) The Board Audit Committee reviewed the Group's audited consolidated results for the year ended December 31, 2022; the announcement lists the company's Board members, including executive and independent non-executive directors - The Board Audit Committee reviewed the Group's audited consolidated results for the year ended December 31, 2022[37](index=37&type=chunk) - Board members include Executive Directors Mr. Tian Qixiang (Chairman), Mr. Gao Shijun (Chief Executive Officer), Mr. Yu Yingquan, Mr. Liu Xianggang, and Independent Non-executive Directors Professor Hua Qiang and Mr. Sun Mingdao[26](index=26&type=chunk)[40](index=40&type=chunk)[134](index=134&type=chunk)[147](index=147&type=chunk) [Annual General Meeting and Closure of Register of Members](index=24&type=section&id=Annual%20General%20Meeting%20and%20Closure%20of%20Register%20of%20Members) The company's Annual General Meeting will be held on May 23, 2023; to determine eligibility for attending and voting, the share transfer registration will be suspended from May 18 to May 23, 2023 - The company's Annual General Meeting will be held on May 23, 2023[130](index=130&type=chunk) - To determine eligibility for attending and voting at the Annual General Meeting, the company will suspend share transfer registration from May 18, 2023, to May 23, 2023[130](index=130&type=chunk) [Publication of Annual Report](index=26&type=section&id=Publication%20of%20Annual%20Report) The 2022 Annual Report, containing all information required by the Listing Rules, will be published on the Stock Exchange and company websites on or about April 14, 2023 - The 2022 Annual Report, containing all information required by the Listing Rules, will be published on the Stock Exchange and company websites on or about April 14, 2023[42](index=42&type=chunk)

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].

Financial Performance - The Group recorded total revenue of approximately RMB8,892 million for the year, a 31.7% increase from RMB6,750 million in 2019 [76]. - Gross profit increased significantly by 58.6% to approximately RMB560 million, up from RMB353 million in 2019 [76]. - Profit after taxation rose to RMB207 million, compared to RMB98 million in 2019 [76]. - Basic earnings per share increased to RMB0.0317 based on a weighted average of 5,995,591,000 ordinary shares [76]. - Revenue of upstream products increased significantly by 26.7% to RMB6,739 million (2019: RMB5,317 million) with a gross profit margin of 6.2% [78]. - Revenue of lysine products surged by 92.8% to approximately RMB1,443 million (2019: RMB749 million), with sales volume increasing by 115.2% in overseas markets and 74.9% in domestic markets [87]. - Revenue of starch-based sweetener was approximately RMB358 million (2019: RMB340 million) [87]. - Revenue of modified starch was RMB312 million (2019: RMB305 million) [87]. - The percentage of corn kernel cost to total cost of sales increased to about 87.3% (2019: 83.9%) due to significant market price increases [87]. - Distribution expenses increased to RMB160,786,000 in 2020 from RMB134,098,000 in 2019, representing a growth of approximately 19.9% [89]. - Administrative staff costs rose to RMB93,835,000 in 2020, up from RMB73,729,000 in 2019, an increase of about 27.3% [89]. - The Group's total staff costs, including Directors' emoluments, were approximately RMB190,000,000 in 2020, down from RMB208,000,000 in 2019, a decrease of about 8.7% [99]. - The gearing ratio improved to 2.8% in 2020 from 3.4% in 2019, indicating a stronger capital structure [103]. - The total shareholder return was 13.3% in 2020, a significant recovery from -8.3% in 2019 [103]. Dividends and Shareholding - The Board recommended a final dividend of HK0.90 cents per share for the year ended 31 December 2020, pending approval at the upcoming annual general meeting [12]. - As of December 31, 2020, Mr. Tian Qixiang holds 3,705,385,194 ordinary shares of the Company, representing 61.81% of the total shareholding [19]. - Merry Boom Group Limited holds 3,705,385,194 shares, representing 61.81% of the issued share capital [40]. - The total number of shares issued by the Company as of December 31, 2020, is 5,994,132,043 [19]. - The Company has adopted a Share Option Scheme to incentivize and retain key employees and management [27]. - 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 [33]. - The total number of Shares that may be allotted and issued upon the exercise of all options under the Share Option Scheme must not exceed 10% of the issued Shares as at the date of approval of the Share Option Scheme [33]. - The total number of Shares issued to each grantee in any 12-month period shall not exceed 1% of the issued Shares [33]. - Any grant of options to a substantial shareholder or an independent non-executive director in excess of 0.1% of the issued Shares or with an aggregate value exceeding HK$5 million requires shareholders' approval [33]. - As of December 31, 2020, no share options had been granted under the Share Option Scheme [37]. Environmental and Sustainability Practices - The Group is committed to complying with all environmental policies and relevant laws, and has established an internal laboratory to ensure product quality meets national standards, including food safety standards [10]. - The Group's environmental and sustainability report reviews compliance with laws and regulations that significantly impact the Group and its relationships with major stakeholders [9]. - The company maintains a commitment to meet all environmental standards set by the PRC government, with no material incidents of noncompliance reported during the year [145]. - The company utilizes methane generated from sewage treatment to produce steam for internal use, contributing to cost reduction and environmental protection [145]. - The Group's fresh water consumption increased to 2,095,597 m³ in 2020, up from 1,194,022 m³ in 2019, with an intensity index of 156 compared to 106 in 2019 [167]. - Total GHG emissions for 2020 were 1,238,861 tonnes of CO2e, an increase from 813,454 tonnes in 2019, with a GHG emission intensity index of 100 [167]. - The Group produced no hazardous waste in its production plants during the year under review [160]. - Non-hazardous waste produced increased to 70,717 tonnes in 2020, compared to 40,778 tonnes in 2019 [167]. - The Group's packaging material usage was 7,893 tonnes in 2020, with 20% of total packaging materials being reused, down from 23% in 2019 [167]. Corporate Governance - The Directors confirmed their independence in accordance with the Listing Rules, ensuring governance standards are upheld [12]. - The Group has established a corporate governance framework that complies with the applicable code provisions, ensuring accountability and integrity to stakeholders [197]. - The Board is composed of four executive Directors and three independent non-executive Directors, ensuring accountability to Shareholders [199]. - The Board formulated long-term and short-term strategic and business plans during the year [200]. - Corporate governance policies and practices were reviewed and monitored by the Board to ensure compliance with the CG Code [200]. - The effectiveness of the Group's internal control and risk management systems was evaluated by the Board [200]. - Integrity of financial information was ensured by the Board, highlighting a commitment to transparency [200]. Risk Management - The executive management team is responsible for managing risks and ensuring appropriate control procedures are in place [184]. - The Board reviews identified risks and mitigation tools annually, ensuring effective risk management [184]. - Monthly management reports on operations, market, and safety issues are circulated to keep management alert to potential risks [184]. - The company faces a lack of growth dynamics in the PRC, with challenges of oversupply and weak demand for cornstarch and related products intensifying over the year [189]. - The company has observed significant price volatility in cornstarch and corn kernel, which may lead to substantial losses if increased costs cannot be passed to customers promptly [191]. - The company is required to maintain a strong balance sheet and sufficient banking facilities to mitigate risks associated with external financing and economic conditions [191]. - The company emphasizes strict quality control and product testing to ensure compliance with customer and national standards, minimizing the risk of negative impacts on brand reputation [191]. Employee Relations and Training - The Group recognizes the health and safety of its employees as a core aspect of long-term success, implementing appropriate controls and training to minimize occupational injuries [116]. - The number of employees increased to 2,313 in 2020 from 2,300 in 2019, with a turnover ratio of 5.2% for males and 0.7% for females [131]. - The average training hours per employee increased to 14.8 hours per month in 2020 from 11.9 hours in 2019 [131]. - On-the-job training is provided to enhance employees' skills and capabilities, ensuring compliance with health and safety regulations [116]. - Training events and drills are mandatory, with results included in staff appraisal records, covering topics such as fire prevention, hazardous chemical handling, and occupational disease prevention [124]. - The Group encourages communication at all levels to achieve positive workplace relations, which are deemed mutually beneficial for both the Group and its employees [116]. Strategic Initiatives - The Group aims to improve production efficiency to maintain minimal production costs and increase profitability despite industry competition [70]. - The Group plans to deploy more resources in the development of different biobased materials in the long run [76]. - The Group aims to become a market leader in the corn refinery industry in China, focusing on cost control and strengthening the balance sheet [113]. - The Group is committed to enhancing its research and development capabilities to support sustainable growth [111]. - The Group's marketing force and market coverage are being enhanced to capture increasing market share [111]. - The company plans to conduct market research and feasibility studies for potential new product projects to enhance its product offerings [193].

[Report on Review of Interim Financial Information](index=3&type=section&id=Report%20on%20Review%20of%20Interim%20Financial%20Information) The auditor reviewed China Starch Holdings Limited's H1 2020 condensed consolidated interim financial statements, finding no material non-compliance - The auditor has reviewed the condensed consolidated financial statements and, based on the review, found no matters leading them to believe the statements were not prepared in all material respects in accordance with HKAS 34[5](index=5&type=chunk)[7](index=7&type=chunk) [Condensed Consolidated Statement of Profit or Loss and Other Comprehensive Income](index=5&type=section&id=Condensed%20Consolidated%20Statement%20of%20Profit%20or%20Loss%20and%20Other%20Comprehensive%20Income) For H1 2020, the company achieved significant growth in revenue, gross profit, and net profit, with increased basic earnings per share Condensed Consolidated Statement of Profit or Loss and Other Comprehensive Income (For the six months ended June 30) | Indicator | 2020 (RMB Thousand) | 2019 (RMB Thousand) | | :--- | :--- | :--- | | Revenue | 3,850,007 | 2,872,208 | | Cost of sales | (3,564,808) | (2,717,941) | | Gross profit | 285,199 | 154,267 | | Distribution expenses | (93,469) | (70,640) | | Administrative expenses | (99,252) | (79,357) | | Impairment loss on financial assets | – | (5,807) | | Other net income | 41,893 | 37,035 | | Operating profit | 134,371 | 35,498 | | Finance income | 8,195 | 11,418 | | Finance costs | (3,638) | (260) | | Profit before income tax | 138,928 | 46,656 | | Income tax expense | (26,572) | (9,907) | | Profit and total comprehensive income for the period | 112,356 | 36,749 | | Profit attributable to owners of the company | 102,728 | 38,293 | | Non-controlling interests | 9,628 | (1,544) | | Basic and diluted earnings per share (RMB) | 0.0171 | 0.0064 | [Condensed Consolidated Statement of Financial Position](index=6&type=section&id=Condensed%20Consolidated%20Statement%20of%20Financial%20Position) As of June 30, 2020, total assets and equity increased, driven by growth in property, plant and equipment, inventory, and trade receivables Condensed Consolidated Statement of Financial Position (As of June 30) | Indicator | 2020 (RMB Thousand) | 2019 (RMB Thousand) | | :--- | :--- | :--- | | **ASSETS** | | | | Total non-current assets | 2,652,684 | 2,593,188 | | Property, plant and equipment | 2,180,267 | 2,085,992 | | Right-of-use assets | 395,693 | 400,543 | | Investment in equities | 2,000 | – | | Total current assets | 1,936,824 | 1,831,786 | | Inventories | 722,769 | 538,777 | | Trade and other receivables | 764,719 | 841,983 | | Cash and cash equivalents | 233,607 | 185,357 | | **EQUITY AND LIABILITIES** | | | | Total equity | 3,039,653 | 2,961,147 | | Total non-current liabilities | 371,320 | 388,396 | | Total current liabilities | 1,178,535 | 1,075,431 | | Trade and other payables | 761,078 | 691,914 | | Borrowings | 184,764 | 151,354 | | Total equity and liabilities | 4,589,508 | 4,424,974 | [Condensed Consolidated Statement of Changes in Equity](index=8&type=section&id=Condensed%20Consolidated%20Statement%20of%20Changes%20in%20Equity) For H1 2020, total equity increased due to profit and comprehensive income, partially offset by the 2019 final dividend payment Condensed Consolidated Statement of Changes in Equity (For the six months ended June 30) | Indicator | 2020 (RMB Thousand) | 2019 (RMB Thousand) | | :--- | :--- | :--- | | Total equity at January 1 | 2,961,147 | 2,926,343 | | Profit and total comprehensive income for the period | 112,356 | 36,749 | | 2019 final dividend | (33,850) | – | | 2018 final dividend | – | (63,292) | | Total equity at June 30 | 3,039,653 | 2,899,800 | [Condensed Consolidated Statement of Cash Flows](index=9&type=section&id=Condensed%20Consolidated%20Statement%20of%20Cash%20Flows) For H1 2020, operating cash flow turned positive, investment outflow decreased, and financing flow remained stable, leading to a net increase in cash and cash equivalents Condensed Consolidated Statement of Cash Flows (For the six months ended June 30) | Indicator | 2020 (RMB Thousand) | 2019 (RMB Thousand) | | :--- | :--- | :--- | | Net cash from operating activities | 141,204 | (318,866) | | Net cash used in investing activities | (126,040) | (322,086) | | Net cash from financing activities | 33,086 | 26,979 | | Net increase/(decrease) in cash and cash equivalents | 48,250 | (613,973) | | Cash and cash equivalents at January 1 | 185,357 | 782,904 | | Cash and cash equivalents at June 30 | 233,607 | 168,931 | [Notes to the Condensed Consolidated Interim Financial Statements](index=10&type=section&id=Notes%20to%20the%20Condensed%20Consolidated%20Interim%20Financial%20Statements) This section details notes to the condensed consolidated interim financial statements, covering preparation basis, policy changes, segment data, income, tax, EPS, dividends, balance sheet items, related party transactions, and post-reporting events [1. Basis of preparation](index=10&type=section&id=1.%20Basis%20of%20preparation) The condensed consolidated interim financial statements adhere to HKFRS 34 and Listing Rules, maintaining 2019 accounting policies with minor 2020 adjustments - The condensed consolidated interim financial statements are prepared in accordance with the Hong Kong Listing Rules and HKAS 34 'Interim Financial Reporting'[21](index=21&type=chunk)[24](index=24&type=chunk) - The statements are presented in RMB and prepared under the historical cost convention, except for certain financial assets measured at fair value[22](index=22&type=chunk)[24](index=24&type=chunk) [2. Adoption of new/revised HKFRSs](index=10&type=section&id=2.%20Adoption%20of%20new%2Frevised%20HKFRSs) The Group adopted HKFRS amendments effective January 1, 2020, which had no financial impact - The Group adopted amendments to HKAS 1 and 8, HKFRS 3, and HKFRS 9, HKAS 39, and HKFRS 7[23](index=23&type=chunk) - The adoption of these amendments had no financial impact on the Group[23](index=23&type=chunk) [3. Segment information](index=11&type=section&id=3.%20Segment%20information) The Group's business segments are upstream products and fermentation/downstream products, with upstream products showing significantly higher H1 2020 sales and results Segment Results (For the six months ended June 30) | Indicator | Upstream Products (RMB Thousand) | Fermentation and Downstream Products (RMB Thousand) | Total (RMB Thousand) | | :--- | :--- | :--- | :--- | | **2020** | | | | | Sales to external customers | 2,980,713 | 869,294 | 3,850,007 | | Inter-segment sales | 136,941 | – | 136,941 | | Reportable segment results | 212,863 | 69,905 | 282,768 | | Profit before income tax | | | 138,928 | | **2019** | | | | | Sales to external customers | 2,227,610 | 644,598 | 2,872,208 | | Inter-segment sales | 100,983 | – | 100,983 | | Reportable segment results | 114,121 | 27,545 | 141,666 | | Profit before income tax | | | 46,656 | [4. Other net income](index=12&type=section&id=4.%20Other%20net%20income) For H1 2020, other net income, mainly from government grant amortization, scrap sales, and payable reversals, increased year-on-year Other Net Income (For the six months ended June 30) | Item | 2020 (RMB Thousand) | 2019 (RMB Thousand) | | :--- | :--- | :--- | | Amortization of government grants | 29,104 | 28,206 | | Gain on sales of scrap materials | 5,249 | 5,892 | | Reversal of payables | 3,795 | – | | Gain on disposal of property, plant and equipment | 467 | 4,195 | | Government grants (Note) | 511 | 2,343 | | Net foreign exchange loss | (1,043) | (1,322) | | Others | 3,810 | (2,279) | | **Total** | **41,893** | **37,035** | - Government grants in the first half of 2020 primarily supported employment, while those in the first half of 2019 mainly supported business development[32](index=32&type=chunk) [5. Profit before income tax](index=12&type=section&id=5.%20Profit%20before%20income%20tax) Key expenses for profit before income tax include salaries, depreciation of PPE and right-of-use assets, delivery, logistics, and R&D Key Expenses (For the six months ended June 30) | Item | 2020 (RMB Thousand) | 2019 (RMB Thousand) | | :--- | :--- | :--- | | Salaries, wages and other benefits | 96,991 | 96,789 | | Depreciation of property, plant and equipment | 117,202 | 78,861 | | Depreciation of right-of-use assets | 4,850 | 2,763 | | Delivery and logistics | 81,827 | 59,730 | | Research and development expenses | 13,111 | 19,101 | [6. Income tax expenses](index=13&type=section&id=6.%20Income%20tax%20expenses) For H1 2020, income tax expenses included current and deferred tax, with one Chinese subsidiary benefiting from a 15% preferential high-tech enterprise tax rate Income Tax Expenses (For the six months ended June 30) | Item | 2020 (RMB Thousand) | 2019 (RMB Thousand) | | :--- | :--- | :--- | | Current income tax – PRC corporate income tax | 7,164 | 507 | | Current income tax – Over-provision in prior years | (300) | – | | Deferred tax | 19,708 | 9,400 | | **Total** | **26,572** | **9,907** | - A Chinese subsidiary was recognized as a high-tech enterprise, enjoying a **15% preferential corporate income tax rate**[37](index=37&type=chunk) [7. Earnings per share](index=13&type=section&id=7.%20Earnings%20per%20share) For H1 2020, basic earnings per share were RMB 0.0171, with no diluted EPS presented due to the absence of dilutive ordinary shares - For the six months ended June 30, 2020, basic earnings per share were **RMB 0.0171** (2019: RMB 0.0064)[37](index=37&type=chunk) - No diluted earnings per share were presented as there were no potentially dilutive ordinary shares in either period[37](index=37&type=chunk) [8. Dividends](index=13&type=section&id=8.%20Dividends) The Board does not recommend an interim dividend for H1 2020 - The Board does not recommend an interim dividend for the six months ended June 30, 2020 (2019: nil)[37](index=37&type=chunk) - The final dividend of **0.62 HK cents per share** for the year ended December 31, 2019, was approved at the AGM on May 19, 2020[37](index=37&type=chunk)[38](index=38&type=chunk) [9. Property, plant and equipment](index=14&type=section&id=9.%20Property%2C%20plant%20and%20equipment) As of June 30, 2020, PPE net book value increased from additions, partially offset by depreciation and disposals Changes in Net Book Value of Property, Plant and Equipment (As of June 30) | Item | 2020 (RMB Thousand) | | :--- | :--- | | At January 1 | 2,085,992 | | Additions | 211,513 | | Depreciation | (117,202) | | Disposals | (36) | | At June 30 | 2,180,267 | [10. Right-of-use assets](index=14&type=section&id=10.%20Right-of-use%20assets) As of June 30, 2020, right-of-use assets' net book value slightly decreased due to depreciation Changes in Net Book Value of Right-of-Use Assets (As of June 30) | Item | 2020 (RMB Thousand) | | :--- | :--- | | At January 1 | 400,543 | | Depreciation | (4,850) | | At June 30 | 395,693 | [11. Investment in equities](index=14&type=section&id=11.%20Investment%20in%20equities) For H1 2020, the Group invested RMB 2 million for a 10% equity stake in Tiangong Biotechnology, recognized as a financial asset at fair value through profit or loss - The Group subscribed for **RMB 2,000,000** in Tiangong Biotechnology (Tianjin) Co., Ltd., holding a **10% equity interest**[43](index=43&type=chunk)[45](index=45&type=chunk) - Tiangong's principal business is the research and development of corn-derived products and commercialization of research results[43](index=43&type=chunk)[45](index=45&type=chunk) - This investment is recognized as a financial asset at fair value through profit or loss, with the fair value initially determined at **RMB 2,000,000**[44](index=44&type=chunk)[45](index=45&type=chunk) [12. Trade and other receivables](index=15&type=section&id=12.%20Trade%20and%20other%20receivables) As of June 30, 2020, total trade and other receivables decreased, with fewer bank acceptance notes but more trade receivables, and a 0-90 day credit period Trade and Other Receivables (As of June 30) | Item | 2020 (RMB Thousand) | 2019 (RMB Thousand) | | :--- | :--- | :--- | | Trade receivables (net of loss allowance) | 187,257 | 142,059 | | Bank acceptance notes | 326,746 | 493,111 | | Prepayments and other tax receivables | 246,374 | 204,441 | | Others | 4,342 | 2,372 | | **Total** | **764,719** | **841,983** | - The Group generally grants credit periods to customers ranging from **0 to 90 days** (2019: 0 to 150 days)[47](index=47&type=chunk) Aging Analysis of Trade Receivables (As of June 30) | Aging | 2020 (RMB Thousand) | 2019 (RMB Thousand) | | :--- | :--- | :--- | | 0 – 30 days | 163,763 | 125,634 | | 31 – 60 days | 17,039 | 11,400 | | 61 – 90 days | 4,143 | 2,274 | | Over 90 days | 2,312 | 2,751 | | **Total** | **187,257** | **142,059** | [13. Share capital](index=16&type=section&id=13.%20Share%20capital) As of June 30, 2020, and December 31, 2019, the company's total issued ordinary shares remained at 5,995,892,043 - As of June 30, 2020, and December 31, 2019, the company had **5,995,892,043** issued ordinary shares[53](index=53&type=chunk)[55](index=55&type=chunk) [14. Trade and other payables](index=17&type=section&id=14.%20Trade%20and%20other%20payables) As of June 30, 2020, total trade and other payables increased, driven by construction, accrued expenses, and salaries, with bills payable secured by bank acceptance notes and deposits Trade and Other Payables (As of June 30) | Item | 2020 (RMB Thousand) | 2019 (RMB Thousand) | | :--- | :--- | :--- | | Trade payables | 144,244 | 129,606 | | Bills payable | 6,500 | 9,747 | | Payables for construction and equipment | 357,775 | 345,319 | | Accrued expenses | 170,564 | 135,470 | | Salaries and welfare payables | 43,194 | 33,035 | | Performance bonds | 20,514 | 12,196 | | Other tax payables | 8,277 | 16,559 | | Sales commission | 4,471 | 4,378 | | Others | 5,539 | 5,604 | | **Total** | **761,078** | **691,914** | - Bills payable are secured by bank acceptance notes of **RMB 2,671,000** and bank deposits of **RMB 5,729,000**[57](index=57&type=chunk)[58](index=58&type=chunk) Aging Analysis of Trade Payables and Bills Payable (As of June 30) | Aging | 2020 (RMB Thousand) | 2019 (RMB Thousand) | | :--- | :--- | :--- | | 0 – 60 days | 96,473 | 94,293 | | 61 – 90 days | 11,816 | 10,098 | | Over 90 days | 42,455 | 34,962 | | **Total** | **150,744** | **139,353** | [15. Borrowings](index=18&type=section&id=15.%20Borrowings) As of June 30, 2020, the Group's total bank borrowings increased, including secured and unsecured loans, some backed by discounted bank acceptance notes or controlling shareholder deposits Borrowings (As of June 30) | Item | 2020 (RMB Thousand) | 2019 (RMB Thousand) | | :--- | :--- | :--- | | Bank borrowings – Secured | 84,764 | 115,354 | | Bank borrowings – Unsecured | 100,000 | 36,000 | | **Total** | **184,764** | **151,354** | - Bank borrowings of **RMB 56,447,000** are secured by discounted bank acceptance notes[64](index=64&type=chunk)[65](index=65&type=chunk) - Bank borrowings of **RMB 28,317,000** (denominated in HKD) are secured by bank deposits provided by controlling shareholder Yi Xing Group Limited[64](index=64&type=chunk)[65](index=65&type=chunk) [16. Related party transactions](index=18&type=section&id=16.%20Related%20party%20transactions) The Group's related party transactions primarily involve key management compensation, with H1 2020 short-term benefits and retirement contributions totaling RMB 893,000 Related Party Transactions (For the six months ended June 30) | Item | 2020 (RMB Thousand) | 2019 (RMB Thousand) | | :--- | :--- | :--- | | Short-term benefits | 875 | 875 | | Contributions to retirement benefit plans | 18 | 80 | | **Total** | **893** | **955** | [17. Event after the reporting period](index=18&type=section&id=17.%20Event%20after%20the%20reporting%20period) Post-reporting period, Jinyuandong, a wholly-owned subsidiary, formed a JV with Musashino Chemical Laboratory to establish Shouguang Juneng Musashino Biotechnology Co., Ltd., focusing on R&D, production, and sales of lactic acid esters and related products - The company's indirect wholly-owned subsidiary, Shouguang Jinyuandong Modified Starch Co., Ltd., entered into a joint venture agreement with Musashino Chemical Laboratory, Ltd. to establish Shouguang Juneng Musashino Biotechnology Co., Ltd[68](index=68&type=chunk)[69](index=69&type=chunk) - Juneng Musashino has a registered capital of **RMB 100,000,000** and primarily engages in the R&D, production, and sales of lactic acid esters and other related products[68](index=68&type=chunk)[69](index=69&type=chunk) [Management Discussion and Analysis](index=19&type=section&id=Management%20Discussion%20and%20Analysis) This section analyzes the company's industry, business development, segment performance, financial position, cost structure, liquidity, human resources, and corporate governance, offering a cautiously optimistic outlook [INDUSTRY OVERVIEW AND COMPANY DEVELOPMENT](index=19&type=section&id=INDUSTRY%20OVERVIEW%20AND%20COMPANY%20DEVELOPMENT) The corn starch and deep processing industry faces challenges from swine fever, overcapacity, trade tensions, and COVID-19, but the company is cautiously optimistic due to a strong balance sheet, new facilities, and a JV for lactic acid market expansion - The corn starch and deep processing industry faces multiple challenges including swine fever, severe overcapacity, China-US trade tensions, and the COVID-19 pandemic, with an uncertain recovery outlook[71](index=71&type=chunk) - The company's new lysine production facility was completed and gradually commenced mass production in the first half of 2020[71](index=71&type=chunk) - The company entered into a joint venture agreement with Musashino Chemical Laboratory to establish Shouguang Juneng Musashino Biotechnology Co., Ltd., aiming to enhance innovation and expand into the lactic acid downstream market[71](index=71&type=chunk) [BUSINESS REVIEW](index=19&type=section&id=BUSINESS%20REVIEW) In H1 2020, the Group saw significant growth in corn starch and by-product production/sales, with new lysine facilities in mass production, but corn starch and starch sugar prices were impacted by oversupply and weak demand - Upstream Products: Production and sales of corn starch and its related by-products recorded substantial growth, primarily due to the full-year operation of Jinyumi Biotechnology's new facilities[71](index=71&type=chunk) - Corn starch selling prices were difficult to adjust due to oversupply, but strong demand for corn starch by-products (e.g., corn germ, corn bran, and corn gluten meal) led to price increases to offset rising corn kernel costs[71](index=71&type=chunk)[73](index=73&type=chunk) - Fermentation and Downstream Products: The new lysine production facility successfully entered mass production in Q2 2020, but lysine market prices were severely impacted by weak demand in the animal feed market[74](index=74&type=chunk)[77](index=77&type=chunk) - Starch sugar performance was also affected by oversupply and weak market demand, while other fermentation and downstream products performed relatively stably[75](index=75&type=chunk)[78](index=78&type=chunk) [FINANCIAL PERFORMANCE](index=20&type=section&id=FINANCIAL%20PERFORMANCE) The Group's revenue significantly increased to RMB 3,850 million, profit after tax rose to RMB 112 million, and gross margin improved to 7.4%, driven by Jinyumi Biotechnology's full-year operations and cost-reducing facilities - The Group's revenue significantly increased to approximately **RMB 3,850 million** (2019: RMB 2,872 million), primarily benefiting from Jinyumi Biotechnology's full-year operations[76](index=76&type=chunk) - Gross margin increased by **2 percentage points to 7.4%** (2019: 5.4%), with gross profit significantly rising to approximately **RMB 285 million** (2019: RMB 154 million)[76](index=76&type=chunk) - Profit after tax significantly increased to approximately **RMB 112 million** (2019: RMB 37 million)[76](index=76&type=chunk) - Basic earnings per share were **RMB 0.0171** (2019: RMB 0.0064)[76](index=76&type=chunk) [SEGMENT PERFORMANCE](index=21&type=section&id=SEGMENT%20PERFORMANCE) Upstream products revenue grew 33.8% with increased corn starch sales and slightly higher average prices, while fermentation and downstream products also grew, with lysine sales up significantly despite weak market demand Upstream Products Segment Performance (For the six months ended June 30) | Indicator | 2020 (RMB Thousand) | 2019 (RMB Thousand) | | :--- | :--- | :--- | | Revenue | 2,980,713 | 2,227,610 | | Gross profit | 205,120 | 106,392 | | Gross margin | 6.9% | 4.8% | - Upstream products segment revenue significantly increased by **33.8%**, with corn starch sales rising substantially to **910,863 tonnes** (2019: 719,823 tonnes), and average selling price slightly up by **0.7%** to approximately **RMB 2,170 per tonne**[82](index=82&type=chunk)[83](index=83&type=chunk) Fermentation and Downstream Products Segment Revenue (For the six months ended June 30) | Product | 2020 (RMB Thousand) | 2019 (RMB Thousand) | | :--- | :--- | :--- | | Lysine | 543,375 | 335,141 | | Starch sugar | 159,586 | 159,784 | | Modified starch | 146,241 | 130,291 | | Others | 20,092 | 19,382 | | **Total** | **869,294** | **644,598** | - Lysine product sales significantly increased to approximately **106,606 tonnes** (2019: 66,598 tonnes), with average selling price slightly up to approximately **RMB 5,097 per tonne**[87](index=87&type=chunk)[88](index=88&type=chunk) - Modified starch revenue increased by **12.3%** to approximately **RMB 146 million**[90](index=90&type=chunk)[97](index=97&type=chunk) [Cost of sales](index=22&type=section&id=Cost%20of%20sales) Cost of sales primarily comprises corn kernels (86.1%) and utility expenses (7.3%), with Shandong corn kernel prices rising, stable electricity/steam costs, and no hedging activities - Key cost components were corn kernels (approximately **86.1%**) and utility expenses (approximately **7.3%**)[92](index=92&type=chunk)[98](index=98&type=chunk) - The average price of corn kernels in Shandong was approximately **RMB 1,842 per tonne** (2019: RMB 1,738 per tonne)[92](index=92&type=chunk)[96](index=96&type=chunk) - The Group did not enter into any forward/futures contracts to hedge against corn kernel price fluctuations during the review period[93](index=93&type=chunk)[99](index=99&type=chunk) [REVIEW OF OTHER OPERATIONS](index=22&type=section&id=REVIEW%20OF%20OTHER%20OPERATIONS) Distribution and administrative expenses significantly increased due to higher production capacity, driven by delivery, logistics, and staff costs, while other net income from government grants and scrap sales also rose - Distribution and administrative expenses significantly increased due to the Group's rising production capacity, with some expenses reclassified to administrative expenses to reflect changes in departmental functions[94](index=94&type=chunk)[100](index=100&type=chunk) Distribution Expenses (For the six months ended June 30) | Item | 2020 (RMB Thousand) | 2019 (RMB Thousand) | | :--- | :--- | :--- | | Delivery and logistics | 81,827 | 59,730 | | Marketing expenses | 7,212 | 5,939 | | Staff costs | 2,951 | 3,219 | | Others | 1,479 | 1,752 | | **Total** | **93,469** | **70,640** | Administrative Expenses (For the six months ended June 30) | Item | 2020 (RMB Thousand) | 2019 (RMB Thousand) | | :--- | :--- | :--- | | Staff costs | 48,398 | 38,127 | | Depreciation and amortization | 13,300 | 4,737 | | Research and development costs | 13,111 | 19,101 | | Government levies | 11,221 | 8,777 | | Others | 13,222 | 8,615 | | **Total** | **99,252** | **79,357** | - Other net income increased to approximately **RMB 42 million** (2019: RMB 37 million), with key items including amortization of government grants, scrap sales, and reversal of payables[105](index=105&type=chunk)[106](index=106&type=chunk) [Liquidity, financial resources and capital structure](index=23&type=section&id=Liquidity%2C%20financial%20resources%20and%20capital%20structure) The Group maintains sufficient working capital, with RMB-denominated cash and cash equivalents, total borrowings of RMB 185 million (some secured), and slight decreases in current/quick ratios alongside an increased gearing ratio - The Directors believe the Group's available working capital is sufficient for current needs, with cash and cash equivalents largely denominated in RMB[111](index=111&type=chunk) - As of June 30, 2020, approximately **RMB 157 million** of borrowings were denominated in RMB, and approximately **RMB 28 million** in HKD, all bearing fixed interest rates and due within one year[112](index=112&type=chunk)[114](index=114&type=chunk) Key Financial Performance Indicators | Indicator | Unit | June 30, 2020 | December 31, 2019 | | :--- | :--- | :--- | :--- | | Trade receivables turnover | days | 27 | 26 | | Trade payables turnover | days | 7 | 8 | | Inventory turnover | days | 32 | 27 | | Current ratio | times | 1.6 | 1.7 | | Quick ratio | times | 1.0 | 1.2 | | Gearing ratio – borrowings to total assets | % | 4.0 | 3.4 | [Human resources and remuneration policies](index=24&type=section&id=Human%20resources%20and%20remuneration%20policies) As of June 30, 2020, the Group employed 2,321 staff, with total staff costs of RMB 97 million, maintaining unchanged remuneration policies since 2019, and no share options granted - As of June 30, 2020, the Group employed **2,321 staff** (2019: 2,349 staff)[113](index=113&type=chunk)[115](index=115&type=chunk) - For the six months ended June 30, 2020, total staff costs (including Directors' emoluments) were approximately **RMB 97 million** (2019: RMB 97 million)[113](index=113&type=chunk)[115](index=115&type=chunk) - The company's remuneration policies have remained unchanged since the 2019 annual report, and no share options were granted[113](index=113&type=chunk)[115](index=115&type=chunk) [Financial management, treasury policy and foreign currency exposure](index=24&type=section&id=Financial%20management%2C%20treasury%20policy%20and%20foreign%20currency%20exposure) The Group's financial management, treasury policy, and foreign currency exposure remain consistent with 2019 annual report disclosures - The Group's financial management, treasury policy, and foreign currency exposure have not significantly changed compared to the information disclosed in the 2019 annual report[116](index=116&type=chunk) [Pledge of assets](index=24&type=section&id=Pledge%20of%20assets) As of June 30, 2020, bills payable were secured by bank acceptance notes and deposits, with no land use rights or buildings pledged for bank credit - As of June 30, 2020, bills payable were secured by bank acceptance notes of **RMB 2,671,000** and bank deposits of **RMB 5,729,000**[117](index=117&type=chunk) - The Group had not pledged any land use rights or buildings as collateral for bank credit[117](index=117&type=chunk) [Contingent liabilities](index=24&type=section&id=Contingent%20liabilities) As of June 30, 2020, the Group had no significant contingent liabilities - As of June 30, 2020, the Group had no significant contingent liabilities[117](index=117&type=chunk) [Disclosure of Additional Information](index=25&type=section&id=Disclosure%20of%20Additional%20Information) This section discloses H1 2020 additional information, including interim dividend policy, directors' and chief executive's interests, substantial shareholders' interests, listed securities dealings, corporate governance, and directors' securities transaction code compliance [INTERIM DIVIDEND](index=25&type=section&id=INTERIM%20DIVIDEND) The Board does not recommend an interim dividend for H1 2020 - The Board does not recommend an interim dividend for the six months ended June 30, 2020 (2019: nil)[119](index=119&type=chunk)[121](index=121&type=chunk) [DIRECTORS' AND CHIEF EXECUTIVE'S INTERESTS](index=25&type=section&id=DIRECTORS%27%20AND%20CHIEF%20EXECUTIVE%27S%20INTERESTS) As of June 30, 2020, directors and the chief executive held interests in the company's or associated corporations' shares, with Mr. Tian Qixiang holding 61.79% via a controlled corporation Directors' and Chief Executive's Interests (As of June 30) | Director Name | Company/Associated Corporation | Capacity/Nature of Interest | Number and Class of Securities Held | Approximate Percentage of Shareholding | | :--- | :--- | :--- | :--- | :--- | | Mr. Tian Qixiang | The Company | Interest in controlled corporation | 3,705,385,194 ordinary shares | 61.79% | | Mr. Tian Qixiang | Yi Xing Group Limited | Beneficial owner | 131 ordinary shares | 54.58% | | Mr. Gao Shijun | Yi Xing Group Limited | Beneficial owner | 60 ordinary shares | 25.00% | | Mr. Yu Yingquan | Yi Xing Group Limited | Beneficial owner | 1 ordinary share | 0.42% | - Save as disclosed, as of June 30, 2020, no directors, chief executive, or their respective associates held any interests or short positions in the shares, underlying shares, or debentures of the company or any of its associated corporations that were required to be recorded[126](index=126&type=chunk)[130](index=130&type=chunk) [INTERESTS OF THE SUBSTANTIAL SHAREHOLDERS AND OTHER PERSONS](index=26&type=section&id=INTERESTS%20OF%20THE%20SUBSTANTIAL%20SHAREHOLDERS%20AND%20OTHER%20PERSONS) As of June 30, 2020, Yi Xing Group Limited, a substantial shareholder, held 61.79% of the company's issued share capital, with Mr. Tian Qixiang deemed interested Interests of Substantial Shareholders and Other Persons (As of June 30) | Shareholder Name | Capacity/Nature of Interest | Number of Shares/Underlying Shares | Percentage of Issued Share Capital | | :--- | :--- | :--- | :--- | | Yi Xing Group Limited | Beneficial owner | 3,705,385,194 (L) | 61.79% | - Yi Xing Group Limited is approximately **54.58%** owned by Mr. Tian Qixiang, the company's Executive Director and Chairman, who is deemed to have an interest in all shares held by Yi Xing Group Limited[129](index=129&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) During the review period, neither the company nor its subsidiaries purchased, sold, or redeemed any of the company's listed securities - During the review period, neither the company nor any of its subsidiaries purchased, sold, or redeemed any of the company's listed securities[128](index=128&type=chunk)[132](index=132&type=chunk) [CORPORATE GOVERNANCE](index=27&type=section&id=CORPORATE%20GOVERNANCE) The company complied with the Listing Rules' Corporate Governance Code for H1 2020, except for Chairman Mr. Tian Qixiang's absence from the 2020 AGM due to other business activities - The company complied with the applicable code provisions set out in the Corporate Governance Code in Appendix 14 of the Listing Rules[134](index=134&type=chunk)[136](index=136&type=chunk) - The only exception was Chairman Mr. Tian Qixiang's absence from the 2020 AGM due to other business activities[134](index=134&type=chunk)[136](index=136&type=chunk) [MODEL CODE FOR SECURITIES TRANSACTIONS BY DIRECTORS](index=27&type=section&id=MODEL%20CODE%20FOR%20SECURITIES%20TRANSACTIONS%20BY%20DIRECTORS) The company adopted a securities dealing code no less exacting than the Model Code, with all directors confirming compliance during the review period - The company adopted its own code for securities dealings, with terms no less exacting than the Model Code[138](index=138&type=chunk) - Following specific enquiries, all Directors confirmed to the company that they had complied with the required standards set out in the dealing code throughout the review period[138](index=138&type=chunk) [REVIEW OF INTERIM FINANCIAL STATEMENTS](index=27&type=section&id=REVIEW%20OF%20INTERIM%20FINANCIAL%20STATEMENTS) The Audit Committee reviewed and discussed the H1 2020 unaudited condensed consolidated interim financial statements with management and auditor Shinewing (HK) CPA Limited - The Audit Committee reviewed and discussed the unaudited condensed consolidated interim financial statements for the six months ended June 30, 2020, with the company's management and auditor Shinewing (HK) CPA Limited[138](index=138&type=chunk) - Shinewing (HK) CPA Limited conducted its review of these statements in accordance with Hong Kong Standard on Review Engagements 2410[138](index=138&type=chunk) [Corporate Information](index=28&type=section&id=Corporate%20Information) This section provides key corporate information for China Starch Holdings Limited, including executive and independent non-executive directors, company secretary, authorized representatives, registered office, Hong Kong principal place of business, auditor, legal advisors, principal bankers, and share registrar - The company's Board of Directors includes Executive Directors Mr. Tian Qixiang (Chairman), Mr. Gao Shijun (Chief Executive Officer), Mr. Liu Xianggang, Mr. Yu Yingquan, and Independent Non-executive Directors Professor Hua Qiang, Mr. Sun Mingdao, and Mr. Yu Jihua[140](index=140&type=chunk) - The Company Secretary is Mr. Leung Siu Hong, and the auditor is Shinewing (HK) CPA Limited[140](index=140&type=chunk) - Principal bankers include Bank of China, China Construction Bank, Industrial and Commercial Bank of China, and Industrial Bank Co., Ltd[142](index=142&type=chunk)

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].