Financial Performance - The group's revenue for the year ended December 31, 2022, was RMB 21,310.9 million, a decrease of 6.4% compared to the previous year[2]. - The group's gross profit for the same period was RMB 13,950.6 million, down 12.9% year-on-year[2]. - The net profit for the year was RMB 4,948.1 million, representing a decline of 28.4% from the previous year[2]. - Basic earnings per share were RMB 0.55, compared to RMB 0.77 in 2021[3]. - Total comprehensive income for the year was RMB 5,110.0 million, down from RMB 6,844.6 million in the previous year[6]. - Adjusted profit before tax for the dairy products and nutritional supplements segment was RMB 6,361,014 thousand, compared to RMB 9,409,000 thousand in the previous year, indicating a decrease of approximately 32.5%[18][20]. - The group's pre-tax profit for 2022 was RMB 1,390,035 thousand, an increase from RMB 1,251,683 thousand in 2021, representing a growth of about 11.1%[33]. - The group's pre-tax profit decreased by 31.1% from RMB 9,672.3 million in 2021 to RMB 6,663.1 million in 2022[63]. - The net profit for the year fell by 28.4% from RMB 6,914.9 million in 2021 to RMB 4,948.1 million in 2022[65]. Dividends and Shareholder Returns - The board proposed a final dividend of HKD 0.1721 per share, in addition to an interim dividend of HKD 0.1131 per share paid in October 2022, totaling approximately HKD 1,005.5 million[2]. - For the year ended December 31, 2022, the company declared an interim dividend of HKD 0.1131 per ordinary share, totaling approximately RMB 877 million, a decrease from RMB 2.21 billion in 2021[36]. - The company plans to distribute a final dividend of HKD 0.1721 per share, totaling approximately HKD 1,560,732,507, subject to shareholder approval[87]. - The company intends to maintain a dividend policy of distributing no less than 30% of net profit for future fiscal years, depending on investment plans[87]. - The company has implemented a share repurchase program that will expire at the next annual general meeting, reflecting its commitment to shareholder value[80]. Assets and Liabilities - Non-current assets totaled RMB 13,286.1 million, an increase from RMB 11,511.8 million in 2021[7]. - Current assets amounted to RMB 22,229.7 million, compared to RMB 19,969.6 million in the previous year[7]. - The company reported a total liability of RMB 10,040,830 thousand, up from RMB 9,078,054 thousand in the previous year, representing an increase of approximately 10.6%[18][21]. - Total assets as of December 31, 2022, amounted to RMB 35,515,773 thousand, an increase from RMB 31,481,424 thousand in 2021, reflecting a growth of approximately 12.9%[18][21]. - The company's total assets as of December 31, 2022, were RMB 25,474.9 million, with a debt-to-asset ratio of 0.33[69]. Revenue Breakdown - The raw milk segment generated external sales of RMB 349,079 thousand, while the dairy products and nutritional supplements segment contributed RMB 20,961,854 thousand, totaling RMB 21,310,933 thousand in external sales[18]. - Revenue from dairy products and nutritional supplements in mainland China was RMB 20,753,386 thousand in 2022, down from RMB 21,102,465 thousand in 2021, indicating a decrease of approximately 1.7%[24]. - The revenue from infant formula products was RMB 19,932.3 million, accounting for 93.5% of total revenue, down 7.4% from RMB 21,515.3 million in 2021[54]. Expenses and Costs - The group's total sales cost for 2022 was RMB 7,360,333 thousand, compared to RMB 6,768,676 thousand in 2021, reflecting an increase of approximately 8.7%[33]. - The cost of sales increased by 8.7% from RMB 6,768.7 million in 2021 to RMB 7,360.3 million in 2022, mainly due to rising raw material costs and increased promotional expenses[55]. - Selling and distribution expenses decreased by 2.7% from RMB 6,729.3 million in 2021 to RMB 6,545.4 million in 2022, attributed to lower promotional activity costs[59]. - Administrative expenses increased by 27.1% from RMB 1,208.0 million in 2021 to RMB 1,535.0 million in 2022, primarily due to rising employee and R&D costs[60]. Corporate Governance and Compliance - The company emphasizes the importance of corporate governance and has adopted the corporate governance code as per the Hong Kong Stock Exchange regulations, ensuring effective internal controls and transparency[78]. - The company has established an audit committee to oversee financial reporting and risk management[85]. - The company’s auditor, Ernst & Young, has reviewed the financial statements for the year ended December 31, 2022[86]. Market and Industry Outlook - The retail sales value of the infant formula market in China is expected to remain stable despite a decline in newborn numbers, supported by government policies[42]. - The company anticipates a recovery in newborn numbers by 2025, returning to levels seen in 2021, due to supportive measures from the three-child policy[42]. - The demand for high-end infant formula in China is expected to drive the entire infant formula industry, supported by a 7.3% CAGR in per capita disposable income from 2017 to 2022, reaching RMB 36,883 in 2022[43]. - The increasing urbanization rate and rising disposable income will enhance consumer purchasing power, particularly in lower-tier cities and rural areas, leading to higher consumption of premium infant formula products[43]. - New national safety standards for infant formula were introduced, imposing stricter regulations on protein, carbohydrates, and micronutrients, benefiting leading companies in the industry[44]. Strategic Initiatives - The company aims to maintain strict control over trade receivables to minimize credit risk, with specific credit terms typically ranging from one to three months[39]. - The group is focusing on e-commerce sales to capture the rapid growth in this sector, particularly targeting younger consumers[47]. - The group is constructing a new production facility in Qiqihar to further enhance its production capabilities[48]. - The company plans to expand into four major business areas: prenatal, infant, children, and health food, creating a comprehensive product family that supports health from birth to longevity[77]. - The company is committed to sustainable development and green circular economy practices, aiming to enhance rural revitalization and fulfill social responsibilities[77]. Share Repurchase and Financial Strategy - The company has repurchased a total of 27,155,000 shares at an aggregate price of approximately HKD 175.9 million during the reporting period, reducing the total issued shares to 9,068,251,704[80]. - The board believes that the share trading price does not reflect the intrinsic value and business outlook of the company[82]. - The net proceeds from the global offering amounted to approximately HKD 6,554.7 million, with specific allocations for debt repayment, business expansion, and acquisitions[84]. - The company allocated HKD 1,721.2 million for offshore debt repayment and HKD 327.7 million for Vitamin World USA's business expansion[84]. - The company plans to utilize the remaining unallocated proceeds from the global offering as outlined in the prospectus[84].

Financial Performance - Revenue for the six months ended June 30, 2022, was RMB 9,672,823 thousand, a decrease of 16.2% compared to RMB 11,543,762 thousand in 2021[5] - Gross profit for the same period was RMB 6,536,625 thousand, down 22.7% from RMB 8,457,088 thousand in 2021[5] - Profit for the period was RMB 2,272,056 thousand, representing a decline of 39.7% from RMB 3,765,254 thousand in 2021[5] - Basic earnings per share attributable to ordinary equity holders of the parent was RMB 0.25, a decrease of 40.5% compared to RMB 0.42 in 2021[5] - Other income and net gains decreased by 15.8% from RMB 901.0 million to RMB 758.8 million, mainly due to reduced government subsidies and interest income[18] - Profit before tax decreased by 38.7% from RMB 5,281.1 million for the six months ended June 30, 2021, to RMB 3,234.7 million for the six months ended June 30, 2022[23] - Income tax expense decreased by 36.5% from RMB 1,515.8 million for the six months ended June 30, 2021, to RMB 962.7 million for the six months ended June 30, 2022, due to the decrease in profit before tax[24] - Net profit decreased by 39.7% from RMB 3,765.3 million for the six months ended June 30, 2021, to RMB 2,272.1 million for the six months ended June 30, 2022[25] Market Outlook - The Chinese infant formula milk powder market is expected to maintain stable retail sales value due to increasing consumer confidence and preference for domestic products[6] - The high-end infant formula segment is projected to drive growth, supported by rising disposable income, which reached RMB 35,128 in 2021, with a CAGR of 8.1% from 2016 to 2021[6] - Favorable government policies, including the promotion of domestic infant formula and the implementation of supportive measures for the three-child policy, are expected to benefit the industry[7] - The market for infant formula is anticipated to expand as urbanization and disposable income rise, particularly in lower-tier cities and rural areas[6] Company Strategy and Operations - The company aims to enhance its product offerings in response to stricter national safety standards for infant formula introduced in 2021[7] - The company is focused on innovation and meeting diverse consumer needs in the infant formula sector, driven by increasing quality management in the dairy industry[6] - The company aims to optimize its product offerings to better suit the needs of Chinese consumers, focusing on a diverse range of products at various price points[8] - The company is constructing two new production facilities to enhance production capacity, which is currently designed for an annual output of approximately 267,000 tons[10] - The company is focusing on digital transformation, enhancing its core competitiveness through big data, cloud computing, IoT, and 5G technologies[34] - The company aims to create a new vertical e-commerce ecosystem targeting maternal and infant health needs, integrating online communities, transactions, and logistics[34] Financial Position and Shareholder Information - As of June 30, 2022, the company had cash and cash equivalents of RMB 10,323.8 million, primarily consisting of cash on hand and bank deposits[27] - As of June 30, 2022, the company's interest-bearing bank and other borrowings amounted to approximately RMB 972.0 million[28] - The company's debt-to-equity ratio increased from 0.42 as of December 31, 2021, to 0.45 as of June 30, 2022[29] - The company has a total of 8,905,216,000 shares issued as of June 30, 2022[40] - Mr. Leng holds 587,516,458 shares, representing 6.60% of the company's equity[40] - The family trust of Mr. Leng holds 3,889,911,881 shares, accounting for 43.68% of the company's equity[40] - The major shareholder Harneys Trustees Limited holds 4,461,740,357 shares, which is 50.10% of the company's equity[45] Research and Development - The company plans to enhance its research and development capabilities, focusing on innovative nutritional products tailored for Chinese infants, and aims to strengthen collaborations with top research institutions[33] - The company aims to enhance its product offerings through internal R&D to closely mimic the composition of breast milk, catering to a diverse customer base with various price points[155] Social Responsibility and Sustainability - The company is committed to sustainable development, aligning with national carbon reduction goals and promoting a green low-carbon industry[36] - The company is actively engaging in social responsibility initiatives, including educational support and community welfare programs[36] - The company emphasizes a commitment to social responsibility, engaging in various charitable activities to support rural revitalization and public health[183] Employee and Management Information - The company has 9,138 full-time employees, with the majority located in China[49] - The total remuneration for key management personnel was RMB 24,794,000 for the six months ended June 30, 2022, compared to RMB 20,239,000 for the same period in 2021, reflecting an increase of approximately 22.5%[134] Recent Developments - The company has no significant acquisitions or disposals of subsidiaries, associates, or joint ventures during the six months ended June 30, 2022[31] - There have been no significant post-reporting events since June 30, 2022[37]

Financial Performance - Revenue increased from RMB 18,592.5 million in 2020 to RMB 22,776.3 million in 2021, representing a year-on-year growth of 22.5%[10] - Gross profit rose from RMB 13,480.3 million in 2020 to RMB 16,007.6 million in 2021, reflecting an 18.7% year-on-year increase[10] - Net profit decreased from RMB 7,436.6 million in 2020 to RMB 6,914.9 million in 2021, but excluding the one-time gain from the acquisition of Original Ecology Livestock Co., net profit increased by 21.2%[10] - Total equity increased to RMB 22,403.4 million in 2021 from RMB 19,185.5 million in 2020[8] - The company's profit before tax decreased by 2.3% from RMB 9,900.5 million in 2020 to RMB 9,672.3 million in 2021, but increased by 21.2% excluding the bargain purchase gain from the acquisition of a subsidiary[43] - Income tax expenses increased by 11.9% from RMB 2,463.9 million in 2020 to RMB 2,757.4 million in 2021, reflecting higher taxable profits[44] - Net profit decreased by 7.0% from RMB 7,436.6 million in 2020 to RMB 6,914.9 million in 2021[45] - The company reported a significant increase in revenue, achieving a total of 1.5 billion in 2021, representing a year-over-year growth of 20%[21] - The company provided a positive outlook for 2022, projecting a revenue growth of 25% and aiming to reach 1.875 billion[21] Assets and Liabilities - Total assets as of December 31, 2021, were RMB 31,481.4 million, up from RMB 28,322.8 million in 2020[8] - Total liabilities decreased to RMB 9,078.1 million in 2021 from RMB 9,137.3 million in 2020[8] - As of December 31, 2021, the company's distributable reserves amounted to approximately RMB 12,361.2 million, with RMB 1,255.6 million proposed for the final dividend[94] - The company's net debt as of December 31, 2021, was calculated based on interest-bearing bank and other borrowings of approximately RMB 934.2 million[49] - The company's debt-to-equity ratio improved from -0.50 on December 31, 2020, to -0.42 on December 31, 2021[50] Research and Development - The company established multiple high-level research platforms in collaboration with 12 academicians and experts across five major fields, enhancing its technological capabilities[11] - The company published four international SCI papers and obtained three invention patents in 2021, contributing to its research and development efforts[11] - The latest product "Xing Fei Fan Zhuo Rui" incorporates advanced research findings, aiming to provide fresher and more suitable formulas for Chinese infants[11] - Research and development efforts are focused on innovative dairy products, with a budget increase of 30% allocated for the upcoming year[64] - Research and development investments increased by 10% in 2021, focusing on enhancing product quality and safety[21] Market Presence and Strategy - The company aims to build world-class smart factories and digital agriculture models, enhancing fresh value across the supply chain[18] - The company is positioned as a pioneer in the Chinese infant formula market, emphasizing its brand as "more suitable for Chinese babies" through innovative marketing strategies[28] - The company has expanded its e-commerce presence to capture the growing online sales market, particularly among younger consumers[25] - The company is expanding its market presence in North America, targeting a 25% increase in market share by the end of the next fiscal year[64] - The company is expanding its market presence in Southeast Asia, targeting a 30% market share in the region by 2025[21] Corporate Governance - The board of directors consists of 11 members, including 4 executive directors, 3 non-executive directors, and 4 independent non-executive directors[186] - The company has established an audit committee to oversee its financial reporting and compliance with international financial reporting standards[93] - The independent directors bring extensive experience from various sectors, including finance and dairy, enhancing the company's governance and strategic direction[78] - The company has adopted corporate governance principles to enhance transparency and accountability, ensuring compliance with applicable laws and regulations[183] - The company has received annual independence confirmations from all independent non-executive directors, ensuring compliance with listing rules[189] Sustainability and Social Responsibility - The company is committed to sustainable development, implementing projects to reduce emissions and promote clean energy[16] - The company donated over 500 million RMB in cash and materials for various charitable activities[18] - The company was awarded the "National Charity Award" by the Ministry of Civil Affairs in 2021[18] - The board believes that good corporate governance standards are key to protecting shareholder interests and enhancing corporate value[183] - The company advocates for environmental responsibility and has established an environmental management system to enhance resource efficiency and reduce pollution[178] Employee and Management - The company had 9,091 full-time employees as of December 31, 2021, an increase from 7,385 employees as of December 31, 2020[160] - The company aims to provide a high-quality work environment and attractive compensation packages to retain and motivate employees[160] - The management team includes experienced professionals, such as the CEO and Chairman, who has been with the company since August 1996, and the CFO, who has been with the company since November 2000[79] - The management team is responsible for the overall development strategy and business planning of the group, ensuring alignment with market trends and opportunities[79] - The company provides competitive salaries and a healthy work environment to motivate employees and supports their career development through training[181] Risks and Compliance - The company faces various financial risks, including interest rate risk, credit risk, foreign exchange risk, and liquidity risk, which are actively managed[168] - The company emphasizes the importance of product quality and reliability, facing risks related to contamination or defects during production and transportation[173] - The company has allocated sufficient resources to ensure compliance with regulatory requirements and maintain good relationships with regulatory authorities[167] - The company has established long-term stable relationships with distributors and conducts regular inspections to ensure compliance with sales and marketing policies[181] - The company has implemented appropriate directors and officers liability insurance to protect against legal claims arising from business operations[195]

® KB 中國飛鶴有限公司 China Feihe Limited (於開曼群島註冊成立的有限公司) 股份代號: 6186 * * * 2020 l<#3 l kes. 程轉益加 है। 幼儿配方奶粉 臻能 (12-36月龄,3段) 幼儿配方奶粉 幼儿配方奶版 幼儿配方奶粉 (12-36月龄,3段) (12-36月龄, 3段) 5 游览 目錄 2 3 4 | --- | --- | |-------|--------------------------| | | | | | 公司資料 | | | 財務概要 | | | 管理層討論與分析 | | 15 | 其他資料及企業管治 | | 28 | 獨立審閱報告 | | 29 | 中期簡明綜合損益表 | | 30 | 中期簡明綜合全面收益表 | | 31 | 中期簡明綜合財務狀況表 | | 33 | 中期簡明綜合權益變動表 | | 34 | 中期簡明綜合現金流量表 | | 36 | 中期簡明綜合財務資料附註 | | | 釋義 | 51 公司資料 董事會 執行董事 冷友斌先生（董事長兼首席執行官） 劉華先生 蔡方良先生 涂芳而女士 張國華先生 非執行董事 高煜先生 陳國 ...

[Company Information](index=3&type=section&id=Company%20Information) This report provides fundamental company information for China Feihe Limited, including details on board members, committee chairs, company secretary, auditor, registered office, and principal place of business - This report provides fundamental company information for China Feihe Limited, including details on board members, committee chairs, company secretary, auditor, registered office, and principal place of business[3](index=3&type=chunk) [Five-Year Financial Summary](index=4&type=section&id=Five-Year%20Financial%20Summary) This section presents a five-year overview of the company's financial performance, including key income statement and balance sheet figures Past Five Fiscal Years' Performance Summary (RMB thousands) | As of December 31 | 2019 | 2018 | 2017 | 2016 | 2015 | | :--- | :--- | :--- | :--- | :--- | :--- | | **Revenue** | 13,721,509 | 10,391,917 | 5,887,260 | 3,724,381 | 3,615,391 | | **Gross Profit** | 9,609,591 | 7,019,090 | 3,790,460 | 2,033,960 | 1,999,867 | | **Profit Before Tax** | 5,682,676 | 3,188,571 | 1,651,061 | 594,947 | 644,860 | | **Profit for the Year** | 3,934,577 | 2,242,254 | 1,160,226 | 406,152 | 381,634 | Past Five Fiscal Years' Assets and Liabilities Summary (RMB thousands) | As of December 31 | 2019 | 2018 | 2017 | 2016 | 2015 | | :--- | :--- | :--- | :--- | :--- | :--- | | **Total Assets** | 23,003,749 | 11,857,435 | 7,013,558 | 4,694,947 | 4,679,126 | | **Total Liabilities** | (9,974,171) | (6,069,951) | (3,428,545) | (2,318,007) | (2,695,025) | | **Total Equity** | 13,029,578 | 5,787,484 | 3,585,013 | 2,376,940 | 1,984,101 | [Chairman's Report](index=5&type=section&id=Chairman's%20Report) The Chairman's report highlights the company's strategic direction and overall performance, emphasizing key achievements and future outlook [2019 Review](index=5&type=section&id=2019%20Review) In 2019, the company achieved significant year-over-year growth in revenue, gross profit, and net profit amidst intensifying industry competition, consolidating its market position through innovation, quality control, brand building, channel integration, and service enhancements, particularly in ultra-high-end and high-end products 2019 Financial Performance Summary (RMB millions) | Metric | 2019 | 2018 | Year-on-Year Growth | | :--- | :--- | :--- | :--- | | **Revenue** | 13,721.5 | 10,391.9 | 32.0% | | **Gross Profit** | 9,609.6 | 7,019.1 | 36.9% | | **Net Profit** | 3,934.6 | 2,242.3 | 75.5% | - The company achieved significant business results in five key areas: **R&D innovation**, **quality control**, **brand building**, **channel integration**, and **service innovation**[9](index=9&type=chunk)[10](index=10&type=chunk)[11](index=11&type=chunk)[12](index=12&type=chunk) [Future Outlook](index=7&type=section&id=Future%20Outlook) The company will continue to focus on its core infant formula business, leveraging R&D to drive innovation, strengthen control over functional raw materials, and build a smart dairy ecosystem aligned with digitalization trends, aiming to be the most trusted infant nutrition expert - Future strategic priorities include **focusing on core business**, **leading with R&D**, and **driving smart transformation**[13](index=13&type=chunk) [Management Discussion and Analysis](index=8&type=section&id=Management%20Discussion%20and%20Analysis) This section provides an in-depth analysis of the company's operations, financial performance, and market environment [Industry Overview](index=8&type=section&id=Industry%20Overview) Despite a slowdown in growth due to declining birth rates, China's infant formula market is projected to continue expanding, driven by consumption upgrades, increased demand for premium products, favorable policies, and growing consumer confidence in domestic brands - Key drivers for China's infant formula market include **increased consumer confidence**, a **premiumization trend**, **policy support**, and a **low breastfeeding rate**[14](index=14&type=chunk)[15](index=15&type=chunk) [Business Overview](index=9&type=section&id=Business%20Overview) The company offers a diverse dairy product portfolio, primarily infant formula, and expanded into nutritional supplements via Vitamin World USA, leveraging an extensive offline distributor network and growing e-commerce presence while continuously expanding production capacity and innovating marketing strategies - As of the end of 2019, the company had an extensive sales network, primarily through **over 1,800 offline clients** covering **more than 109,000 retail points**, with offline sales accounting for **91.3% of total dairy product revenue**[17](index=17&type=chunk) - The company operates **six production facilities** with a combined designed annual capacity of **126,800 tons**, with ongoing expansion and new construction to meet growing demand[18](index=18&type=chunk) - The acquisition of Vitamin World USA in early 2018 expanded the company into nutritional supplements, operating **over 120 specialty stores** across the US with **RMB 578 million in annual revenue** by the end of 2019, representing **4.2% of the Group's total revenue**[20](index=20&type=chunk) [Operating Results and Analysis](index=11&type=section&id=Operating%20Results%20and%20Analysis) In 2019, the company's total revenue grew by 32.0% to RMB 13.72 billion, primarily driven by a 41.4% increase in high-end infant formula sales, while gross margin improved to 70.0% and net profit surged by 75.5% to RMB 3.93 billion 2019 Consolidated Income Statement Summary (RMB thousands) | Metric | 2019 | 2018 | Year-on-Year Change | | :--- | :--- | :--- | :--- | | **Revenue** | 13,721,509 | 10,391,917 | 32.0% | | **Gross Profit** | 9,609,591 | 7,019,090 | 36.9% | | **Selling and Distribution Expenses** | (3,847,985) | (3,661,314) | 5.1% | | **Administrative Expenses** | (913,226) | (580,289) | 57.4% | | **Profit Before Tax** | 5,682,676 | 3,188,571 | 78.2% | | **Profit for the Year** | 3,934,577 | 2,242,254 | 75.5% | Revenue Breakdown by Product Category (RMB thousands) | Product Category | 2019 Revenue | % of Total | 2018 Revenue | % of Total | Year-on-Year Change | | :--- | :--- | :--- | :--- | :--- | :--- | | **High-end Infant Formula** | 9,411,461 | 68.6% | 6,657,636 | 64.1% | 41.4% | | **Regular Infant Formula** | 3,126,654 | 22.8% | 2,541,562 | 24.4% | 23.0% | | **Other Dairy Products** | 605,169 | 4.4% | 550,383 | 5.3% | 10.0% | | **Nutritional Supplements** | 578,225 | 4.2% | 642,336 | 6.2% | (10.0)% | | **Total Revenue** | **13,721,509** | **100.0%** | **10,391,917** | **100.0%** | **32.0%** | Gross Profit and Gross Margin by Product Category | Product Category | 2019 Gross Profit (thousands RMB) | Gross Margin | 2018 Gross Profit (thousands RMB) | Gross Margin | | :--- | :--- | :--- | :--- | :--- | | **High-end Infant Formula** | 7,141,009 | 75.9% | 5,091,127 | 76.5% | | **Regular Infant Formula** | 1,939,586 | 62.0% | 1,593,051 | 62.7% | | **Other Dairy Products** | 210,240 | 34.7% | 104,275 | 18.9% | | **Nutritional Supplements** | 318,756 | 55.1% | 230,637 | 35.9% | | **Total** | **9,609,591** | **70.0%** | **7,019,090** | **67.5%** | [Liquidity and Capital Resources](index=15&type=section&id=Liquidity%20and%20Capital%20Resources) The company primarily funds operations through operating cash flow, bank borrowings, and IPO proceeds, holding RMB 7.38 billion in cash and equivalents and RMB 5.39 billion in structured deposits by year-end 2019, with a healthy capital structure reflected by an improved debt-to-asset ratio and a significant increase in net cash from operating activities - As of December 31, 2019, the Group held **RMB 7.378 billion in cash and cash equivalents** and **RMB 5.390 billion in structured deposits**[35](index=35&type=chunk)[36](index=36&type=chunk) Cash Flow Summary (RMB millions) | Cash Flow Activity | 2019 | 2018 | | :--- | :--- | :--- | | **Net Cash from Operating Activities** | 5,180.5 | 3,121.2 | | **Net Cash Used in Investing Activities** | (5,514.9) | (3,272.4) | | **Net Cash from/(used in) Financing Activities** | 4,123.0 | (509.0) | - The Group's debt-to-asset ratio improved from **-0.65 at the end of 2018 to -0.49 at the end of 2019**, indicating a healthy capital structure[38](index=38&type=chunk) [Subsequent Events](index=17&type=section&id=Subsequent%20Events) The COVID-19 pandemic, which emerged at the end of 2019, did not significantly negatively impact the company's core operations in Q1 2020, as it swiftly implemented measures to ensure raw material supply, production, and logistics, while shifting marketing activities online, projecting a revenue growth of no less than 30% for Q1 2020 - To address the pandemic, the company implemented several measures including **donating RMB 100 million and RMB 100 million worth of nutritional products**, **maintaining continuous factory production** with **over 40% year-on-year increase in finished product output** in Jan-Feb 2020, **stabilizing the supply chain** with **over 40% year-on-year increase in raw milk consumption**, **ensuring smooth logistics** with **98% product delivery rate** in February 2020, and **transitioning to online marketing** with **nearly 90,000 online live broadcasts** covering **over 2.1 million participants** by March 15[45](index=45&type=chunk)[46](index=46&type=chunk)[47](index=47&type=chunk)[48](index=48&type=chunk)[49](index=49&type=chunk) - Despite the pandemic's impact, the company anticipates **Q1 2020 revenue growth of no less than 30%**, indicating no significant adverse effect[50](index=50&type=chunk) [Directors and Senior Management](index=19&type=section&id=Directors%20and%20Senior%20Management) This section provides biographical details of the company's board members and senior management, including their positions, responsibilities, industry experience, educational backgrounds, and honors [Biographies of Directors and Senior Management](index=19&type=section&id=Biographies%20of%20Directors%20and%20Senior%20Management) This section details the personal biographies of the company's board members and senior management, including executive, non-executive, and independent non-executive directors, as well as joint company secretaries, covering their age, position, responsibilities, industry experience, education, and honors - The Board of Directors comprises **12 members**, including **6 executive directors, 2 non-executive directors, and 4 independent non-executive directors**, meeting listing rule requirements for independent non-executive director numbers and professional qualifications[51](index=51&type=chunk)[132](index=132&type=chunk) - Mr. Leng Youbin serves as **Executive Director, Chairman, and Chief Executive Officer**, responsible for the Group's overall development strategy and business plans[51](index=51&type=chunk)[52](index=52&type=chunk) [Directors' Report](index=27&type=section&id=Directors'%20Report) The Directors' Report covers the company's business review, dividend policy, use of IPO proceeds, key customer and supplier information, and major risks and uncertainties [Business Review and Dividends](index=27&type=section&id=Business%20Review%20and%20Dividends) This section reviews the company's core business activities, primarily the production and sale of infant formula and nutritional supplements, and outlines its dividend policy to distribute no less than 30% of annual net profit, with a proposed final dividend for 2019 of HKD 0.1943 per share, representing approximately 40% of 2019 profit - The company's primary business involves the **production and sale of high-end and regular infant formula**, diversified into the retail healthcare sector through the **acquisition of Vitamin World**[66](index=66&type=chunk) - The company's dividend policy aims to distribute **no less than 30% of annual net profit**, with the Board proposing a **final dividend of HKD 0.1943 per share for 2019**, totaling approximately **40% of the year's profit**[69](index=69&type=chunk)[70](index=70&type=chunk) [Use of Net Proceeds](index=31&type=section&id=Use%20of%20Net%20Proceeds) The company raised approximately HKD 6.555 billion in net proceeds from its global offering on November 13, 2019, with about HKD 257.7 million utilized by year-end 2019 primarily for offshore debt repayment, Vitamin World USA business expansion, and working capital, with remaining funds to be used as stated in the prospectus Use of Net Proceeds from Global Offering (As of December 31, 2019) (HKD millions) | Purpose | Amount Utilized (HKD millions) | | :--- | :--- | | Repayment of offshore debt | 175.1 | | Business expansion of Vitamin World USA | 39.2 | | Working capital and general corporate purposes | 43.4 | | **Total** | **257.7** | [Major Customers and Suppliers](index=31&type=section&id=Major%20Customers%20and%20Suppliers) As of year-end 2019, the company exhibited relatively high supplier concentration, with the top five suppliers accounting for 43.8% of total purchases and the largest supplier at 21.0%, while its customer base was more diversified, with the top five customers contributing 7.6% of total revenue and the largest customer only 2.9% - The **top five suppliers accounted for 43.8% of total purchases**, with the **largest supplier representing 21.0%**[77](index=77&type=chunk) - The **top five customers accounted for 7.6% of total revenue**, with the **largest customer representing 2.9%**[77](index=77&type=chunk) [Pre-IPO Share Option Scheme](index=38&type=section&id=Pre-IPO%20Share%20Option%20Scheme) The company adopted a Pre-IPO Share Option Scheme on October 14, 2019, to incentivize and retain key talent, with a maximum of 190,190,704 options granted to Dasheng Limited at an exercise price of USD 0.1416 per share, representing 2.13% of issued shares, of which 43% vested by year-end 2019 - The company granted **190,190,704 share options to Dasheng Limited** on October 14, 2019, with an exercise price of **USD 0.1416 per share**, representing approximately **2.13% of issued shares** at the end of the reporting period[101](index=101&type=chunk)[106](index=106&type=chunk)[107](index=107&type=chunk) - Of the options granted to Dasheng Limited, **43% vested and became exercisable by December 31, 2019**, with the remaining **57% to vest upon achieving 2020 fiscal year performance targets**[107](index=107&type=chunk) [Principal Risks and Uncertainties](index=43&type=section&id=Principal%20Risks%20and%20Uncertainties) The company faces key financial risks, including interest rate, credit, and foreign exchange risks, as well as business risks such as negative publicity from product quality issues, product contamination or defects, operational disruptions or raw material price volatility, failure to adapt to changing consumer preferences, and challenges associated with overseas expansion - **Financial risks** primarily include **interest rate risk, credit risk, and foreign exchange risk** (involving USD, HKD, and CAD loans and investments in Canada)[116](index=116&type=chunk)[117](index=117&type=chunk)[118](index=118&type=chunk) - **Business risks** encompass **publicity risk** from product quality issues, **product risk** of contamination or defects, **operational risk** from complex production and raw material dependency/price volatility, **competition risk** from rapidly changing consumer preferences, and **expansion risk** related to overseas operations[119](index=119&type=chunk)[120](index=120&type=chunk)[121](index=121&type=chunk)[122](index=122&type=chunk)[123](index=123&type=chunk) [Corporate Governance Report](index=47&type=section&id=Corporate%20Governance%20Report) This report details the company's commitment to high corporate governance standards, outlining the board's structure, the combined roles of Chairman and CEO, and the functions of its audit, remuneration, and nomination committees [Board of Directors and Committees](index=47&type=section&id=Board%20of%20Directors%20and%20Committees) The company is committed to maintaining high corporate governance standards, with a diverse 12-member Board of Directors, where the Chairman and CEO roles are combined in Mr. Leng Youbin for efficient decision-making, and established audit, remuneration, and nomination committees comply with listing rules to oversee specific matters - The Board of Directors consists of **12 members**, including **6 executive directors, 2 non-executive directors, and 4 independent non-executive directors**, meeting listing rule requirements for independent non-executive director numbers and professional qualifications[130](index=130&type=chunk)[132](index=132&type=chunk) - The roles of Chairman and Chief Executive Officer are combined in Mr. Leng Youbin, a deviation from the Corporate Governance Code's recommendation, which the Board believes facilitates **strong leadership and efficient strategic execution**[128](index=128&type=chunk)[131](index=131&type=chunk) - The company has established an **Audit Committee, Remuneration Committee, and Nomination Committee**, with clearly defined terms of reference and primary responsibilities[137](index=137&type=chunk)[138](index=138&type=chunk)[139](index=139&type=chunk)[140](index=140&type=chunk) [Risk Management and Internal Control](index=56&type=section&id=Risk%20Management%20and%20Internal%20Control) The Board holds ultimate responsibility for the Group's risk management and internal control systems, reviewing their effectiveness annually, with the Audit Committee assisting in oversight, and an independent internal audit department ensuring the systems address significant financial, compliance, and operational risks - The Board affirms its responsibility for **risk management and internal control systems**, reviewing their effectiveness annually, with the Audit Committee assisting in oversight[146](index=146&type=chunk) - The company has established a **risk management system**, including measures such as forming an Audit Committee, adopting various policies to comply with listing rules, and providing anti-corruption training[147](index=147&type=chunk) - The **internal audit department** is responsible for independent reviews of the risk management and internal control systems, reporting to the Audit Committee, and the Board considers the existing systems **adequate and effective**[147](index=147&type=chunk)[148](index=148&type=chunk) [Independent Auditor's Report](index=62&type=section&id=Independent%20Auditor's%20Report) This report presents the independent auditor's opinion on the company's financial statements and highlights key audit matters [Auditor's Opinion and Key Audit Matters](index=62&type=section&id=Auditor's%20Opinion%20and%20Key%20Audit%20Matters) Ernst & Young, the auditor, issued an unmodified opinion on the company's 2019 consolidated financial statements, deeming them to fairly represent the Group's financial position and performance, with key audit matters identified as the impairment assessment of trade receivables and the determination of inventory write-downs to net realizable value, both involving significant management judgment and estimation - The auditor issued an **unmodified opinion**, stating that the consolidated financial statements fairly represent the Group's financial position in accordance with **International Financial Reporting Standards (IFRS)**[159](index=159&type=chunk) - Key audit matters include **impairment of trade receivables**, which involves significant judgment and estimation in assessing expected credit losses, and **write-down of inventories to net realizable value**, which requires significant management assumptions and estimates[161](index=161&type=chunk)[162](index=162&type=chunk)[163](index=163&type=chunk) [Consolidated Financial Statements](index=67&type=section&id=Consolidated%20Financial%20Statements) This section presents the company's comprehensive financial statements, including the consolidated income statement, balance sheet, and cash flow statement, along with detailed notes [Consolidated Statement of Profit or Loss](index=67&type=section&id=Consolidated%20Statement%20of%20Profit%20or%20Loss) For 2019, the company achieved RMB 13.72 billion in revenue, a 32.0% year-on-year increase; gross profit of RMB 9.61 billion, up 36.9%; and profit for the year attributable to owners of the parent of RMB 3.93 billion, a 75.5% increase, with basic and diluted earnings per share both at RMB 0.48 Consolidated Statement of Profit or Loss Key Data (RMB thousands) | Metric | 2019 | 2018 | | :--- | :--- | :--- | | **Revenue** | 13,721,509 | 10,391,917 | | **Gross Profit** | 9,609,591 | 7,019,090 | | **Profit Before Tax** | 5,682,676 | 3,188,571 | | **Profit for the Year Attributable to Owners of the Parent** | 3,934,577 | 2,242,254 | | **Basic Earnings Per Share (RMB)** | 0.48 | 0.28 | [Consolidated Statement of Financial Position](index=69&type=section&id=Consolidated%20Statement%20of%20Financial%20Position) As of December 31, 2019, the company's total assets significantly increased by 94.0% to RMB 23.00 billion from RMB 11.86 billion in the prior year, with total liabilities at RMB 9.97 billion and total equity at RMB 13.03 billion, up 125.1%, driven by strong profitability and IPO proceeds Consolidated Statement of Financial Position Summary (RMB thousands) | Metric | December 31, 2019 | December 31, 2018 | | :--- | :--- | :--- | | **Total Non-current Assets** | 5,715,172 | 4,562,710 | | **Total Current Assets** | 17,288,577 | 7,294,725 | | **Total Assets** | **23,003,749** | **11,857,435** | | **Total Current Liabilities** | 7,438,500 | 4,860,234 | | **Total Non-current Liabilities** | 2,535,671 | 1,209,717 | | **Total Liabilities** | **9,974,171** | **6,069,951** | | **Net Assets (Total Equity)** | **13,029,578** | **5,787,484** | [Consolidated Statement of Cash Flows](index=72&type=section&id=Consolidated%20Statement%20of%20Cash%20Flows) In 2019, net cash from operating activities surged by 66.0% to RMB 5.18 billion, indicating strong core business cash generation, while net cash used in investing activities was RMB 5.51 billion, primarily for structured deposits and property, plant, and equipment, and net cash from financing activities was RMB 4.12 billion, mainly from new borrowings and share issuance, partially offset by dividend payments and loan repayments, resulting in cash and cash equivalents of RMB 4.67 billion at year-end Consolidated Statement of Cash Flows Summary (RMB thousands) | Metric | 2019 | 2018 | | :--- | :--- | :--- | | **Net Cash from Operating Activities** | 5,180,535 | 3,121,196 | | **Net Cash Used in Investing Activities** | (5,514,896) | (3,272,449) | | **Net Cash from/(used in) Financing Activities** | 4,123,021 | (509,032) | | **Net Increase/(Decrease) in Cash and Cash Equivalents** | 3,788,660 | (660,285) | | **Cash and Cash Equivalents at Year-End** | 4,666,585 | 895,854 | [Notes to the Financial Statements](index=74&type=section&id=Notes%20to%20the%20Financial%20Statements) This section provides detailed explanations and supplementary information for the consolidated financial statements, covering the company's general information, basis of preparation, significant accounting policies, critical accounting judgments and estimates, and detailed breakdowns of revenue, assets, liabilities, equity, related party transactions, and financial instrument risks - The financial statements are prepared in accordance with **International Financial Reporting Standards (IFRS)**[182](index=182&type=chunk) - The notes provide detailed disclosures on **revenue breakdown by region and product category**, **composition of various expenses**, **directors' emoluments**, **dividend policy**, **share option scheme**, **detailed asset and liability information**, and **financial risk management policies**[244](index=244&type=chunk)[255](index=255&type=chunk)[259](index=259&type=chunk)[269](index=269&type=chunk)[321](index=321&type=chunk)