Economic Performance - In the first half of 2020, the gross domestic product (GDP) of the People's Republic of China increased by 3.2% year on year[19]. - Various economic indicators rebounded in the second quarter of 2020, indicating a stable progression and gradual recovery of the overall national economy[19]. - The company anticipates that domestic demand recovery will face certain restrictions due to the ongoing COVID-19 pandemic[19]. - The board of directors is optimistic about the company's performance in the second half of the year, given the government's measures for epidemic prevention and economic development[19]. - The company continues to monitor the economic environment closely to adapt its strategies accordingly[19]. Company Strategy and Operations - The company is focused on resuming work, production, and trading activities in the market as part of its recovery strategy[19]. - The company is committed to accelerating the resumption of operations and enhancing consumer confidence in the market[19]. - The company aims to adapt to the "otaku economy" by increasing online shopping demand and developing high-end nutritious meals in response to market changes[39]. - The Group plans to enhance online sales channels and community services to adapt to changing consumer behaviors post-pandemic[87]. - The Group will focus on value marketing to create brand values and maintain steady growth, emphasizing "Integrity," "Brand," and "Taste"[94]. Financial Performance - The Group recorded a revenue of RMB11,816.5 million during the Period under Review, representing an increase of 3.0% compared to RMB11,469.5 million in the first half of 2019[22]. - Profit attributable to equity holders of the Company was RMB1,065.1 million, representing an increase of 6.8% compared to RMB997.5 million in the corresponding period last year[25]. - Operating profit for the Period was RMB1,389.3 million, increasing by 6.4% from RMB1,305.3 million in the first half of 2019[22]. - Revenue for the six months ended June 30, 2020, was RMB 11,816,519 thousand, an increase of 3.02% compared to RMB 11,469,537 thousand in the same period of 2019[134]. - Comprehensive income for the six months ended June 30, 2020, is RMB 1,063,156 thousand, compared to RMB 997,501 thousand for the same period in 2019, representing a growth of 6.2%[147]. Revenue Breakdown - The food business recorded a revenue of RMB5,206.8 million for the first half of 2020, representing a significant increase of 22.0% compared to the previous year[26]. - The beverage business recorded a revenue of RMB 6,290.5 million in the first half of 2020, a decrease of 7.4% compared to the same period last year, but with a quarter-on-quarter growth of 46.7%[42]. - "Soup Daren" achieved a revenue growth of 29.7% compared to the corresponding period last year, reflecting strong market recognition[32]. - The tea beverage segment generated revenue of RMB 2,897.3 million in the first half of 2020, with a doubling of quarter-on-quarter growth[41]. - Revenue from the juice business for the first half of 2020 was RMB793.5 million, showing substantial quarter-on-quarter positive growth[50]. Expenses and Cost Management - Selling and marketing expenses rose to RMB2,624.2 million, an increase of 3.6% from RMB2,531.9 million in the first half of 2019, mainly due to enhanced brand promotion efforts[22]. - Administrative expenses decreased by 4.9% to RMB458.1 million from RMB481.5 million in the first half of 2019, primarily due to the PRC government's adjustment of social insurance[22]. - Promotion and advertising expenses increased to RMB 906,726 thousand, compared to RMB 736,166 thousand in the previous year, reflecting a growth of approximately 23.2%[199]. Cash Flow and Financial Position - As of June 30, 2020, the Group's total cash and bank balances were RMB6,103.8 million, a decrease from RMB6,483.5 million as of December 31, 2019[64]. - The Group's net cash inflow from operating activities was RMB1,097.2 million, while net cash outflow from investing activities was RMB1,760.8 million for the first half of 2020[72]. - The net decrease in cash and cash equivalents for the period was RMB (761,077) thousand, an improvement from RMB (1,345,541) thousand in the same period of 2019[153]. - Total liabilities increased to RMB 8,683,383 thousand as of June 30, 2020, up from RMB 8,124,112 thousand at the end of 2019, an increase of 6.87%[143]. Governance and Compliance - The interim condensed consolidated financial information for the six months ended June 30, 2020, has been reviewed by the audit committee and independent auditors[18]. - The Company has complied with all provisions of the Corporate Governance Code during the review period[117]. - The Audit Committee reviewed the unaudited interim results for the period and recommended their adoption by the Board[121]. - The Company confirmed that all Directors fully complied with the Model Code for Securities Transactions throughout the review period[118]. - The Group's commitment to brand building and product innovation is expected to drive continuous growth and maximize benefits[98].

Corporate Information This section provides essential company details, including listing information, key addresses, board and committee members, and professional advisors - The company's basic information includes its listing on the **Hong Kong Stock Exchange (code 220)**, registered address, principal place of business, board and committee members, principal bankers, auditors, and legal advisors[9](index=9&type=chunk)[10](index=10&type=chunk) Financial Summary This section presents a five-year financial overview, including key performance indicators and balance sheet summaries Five-Year Performance Summary (As at December 31) | Indicator | 2019 | 2018 | 2017 (Restated) | 2016 | 2015 | | :--- | :--- | :--- | :--- | :--- | :--- | | **Revenue (RMB '000)** | 22,019,737 | 21,772,240 | 20,821,949 | 20,985,532 | 22,101,871 | | **Gross Profit (RMB '000)** | 7,918,290 | 7,288,599 | 6,576,938 | 7,227,800 | 8,140,733 | | **Profit Before Income Tax (RMB '000)** | 1,971,360 | 1,539,774 | 1,276,824 | 1,067,972 | 1,170,761 | | **Profit for the Year (RMB '000)** | 1,366,212 | 1,029,704 | 878,216 | 607,329 | 834,505 | | **Basic Earnings Per Share (RMB Cents)** | 31.63 | 23.84 | 20.33 | 14.06 | 19.32 | Five-Year Balance Sheet Summary (As at December 31) | Indicator | 2019 | 2018 | 2017 | 2016 | 2015 | | :--- | :--- | :--- | :--- | :--- | :--- | | **Total Assets (RMB '000)** | 21,757,042 | 21,732,558 | 20,036,552 | 20,705,427 | 21,606,419 | | **Total Liabilities (RMB '000)** | 8,124,112 | 8,510,251 | 7,221,075 | 8,665,316 | 10,004,016 | | **Total Equity (RMB '000)** | 13,632,930 | 13,222,307 | 12,815,477 | 12,040,111 | 11,602,403 | Chairman's Statement The Chairman's statement highlights steady growth driven by value marketing and product innovation, with a proposed dividend and a forward-looking strategy addressing the COVID-19 pandemic 2019 Performance Overview | Indicator | Amount (RMB Million) | Year-on-Year Growth | | :--- | :--- | :--- | | **Revenue** | 22,019.7 | +1.1% | | **Profit After Tax** | 1,366.2 | +32.7% | - The company maintained steady growth amidst intense industry competition by adhering to **"value marketing"** and **"healthy operations,"** stabilizing channel prices, continuously investing in brands, and managing product freshness; star products **"Uni-President Assam Milk Tea"** and **"Master Kong Soup Noodle"** achieved sustained **double-digit revenue growth**, becoming key growth engines[15](index=15&type=chunk) - The company actively innovated, developing new product formats such as **"Tea King" sugar-free tea** and **"Kai Xiao Zao" self-heating meals**, and expanded the boundaries of convenience food by applying **self-heating technology**[15](index=15&type=chunk) - The Board recommended a final cash dividend of **RMB 31.63 cents per share** for the year ended December 31, 2019, totaling approximately **RMB 1,366.2 million**[16](index=16&type=chunk) - Looking ahead to 2020, in response to the **COVID-19 pandemic**, the Group actively cooperated with epidemic prevention measures and strived for work resumption, while also seizing opportunities from the **"stay-at-home economy"** driven shift in e-commerce consumption patterns[16](index=16&type=chunk) [Management Discussion & Analysis](index=10&type=section&id=Management%20Discussion%20%26%20Analysis) This section provides an in-depth analysis of the company's operational and financial performance, strategic initiatives, and market outlook [Economic Environment](index=10&type=section&id=Economic%20Environment) In 2019, China's GDP grew by 6.1%, with economic growth slowing due to US-China trade friction, but government stimulus measures stabilized livelihoods; the food industry saw increased competition due to lower raw material costs and favorable policies, with consumption trends driven by product richness and innovation, while the early 2020 COVID-19 pandemic had no significant impact on the Group's business at the time of reporting - In 2019, China's GDP grew by **6.1%**, a **0.5 percentage point decrease** from the previous year, with government measures like tax cuts stabilizing the national economy and the food industry continuing to thrive[21](index=21&type=chunk) - The food industry experienced declining raw material prices, easing cost pressures, but faced intensified market competition, fluctuating channel prices, and diversified marketing strategies[21](index=21&type=chunk) - As of the annual report release date, the Group had not identified any significant impact from the early 2020 **COVID-19 pandemic** on its business and will closely monitor its long-term effects[21](index=21&type=chunk) [Business Review](index=11&type=section&id=Business%20Review) In 2019, the Group's total revenue reached **RMB 22,019.7 million**, a **1.1% year-on-year increase**, with both food and beverage businesses growing by **0.9%**; the company achieved steady operational improvements by focusing on brand building, value marketing, "healthy operations" to stabilize market prices, and optimizing product structure 2019 Segment Business Revenue | Business Segment | Revenue (RMB Million) | Year-on-Year Growth | | :--- | :--- | :--- | | **Food Business** | 8,500.7 | +0.9% | | **Beverages Business** | 12,730.5 | +0.9% | | **Total** | **22,019.7** | **+1.1%** | [Food Business](index=11&type=section&id=Food%20Business) The food business addressed new consumer demands for quality and convenience by applying self-heating technology and developing quick-cook fresh noodles; instant noodle revenue reached **RMB 8,500.7 million**, a **0.9% year-on-year increase**, primarily driven by the sustained double-digit growth of the mid-to-high-end brand **"Master Kong Soup Noodle"**, while innovative products like **"Kai Xiao Zao" self-heating meals** and **"Q Xiaoxian" fresh noodles** expanded the product line Instant Noodle Business Performance | Indicator | 2019 | Year-on-Year Growth | | :--- | :--- | :--- | | **Revenue (RMB Million)** | 8,500.7 | +0.9% | - Instant noodle business growth was primarily attributed to the mid-to-high-end brand **"Master Kong Soup Noodle,"** which continued to achieve **double-digit revenue growth**[22](index=22&type=chunk)[34](index=34&type=chunk) - The company launched a series of innovative products, such as **"Teng Jiao" rattan pepper beef noodles**, **"Du Hui Xiao Guan" spicy fatty intestine noodles**, **"Uni-President Qie Huang" tomato and egg noodles**, and the premium lifestyle noodle **"Man Han Da Can"**[23](index=23&type=chunk)[29](index=29&type=chunk)[31](index=31&type=chunk)[36](index=36&type=chunk) - In other food categories, the **"Kai Xiao Zao" self-heating meal series** was well-received and expanded with new flavors, while **"Q Xiaoxian" fresh noodles** entered the Shanghai market, catering to the needs of middle-class families[37](index=37&type=chunk)[38](index=38&type=chunk) [Beverages Business](index=16&type=section&id=Beverages%20Business) The beverages business generated **RMB 12,730.5 million** in revenue in 2019, a **0.9% year-on-year increase**, by adhering to value marketing, stabilizing channel prices, and focusing on brand building; milk tea business achieved **double-digit growth for three consecutive years**, up **13.1%**, fruit juice business grew by **1.3%**, and tea beverage business met high-end market demands with new products like **"Tea King" sugar-free tea**, while the company continued youth-oriented marketing through collaborations with popular media like e-sports and idol endorsements Beverage Business Segment Performance | Business Segment | 2019 Revenue (RMB Million) | Year-on-Year Growth | | :--- | :--- | :--- | | **Total Beverage Business** | 12,730.5 | +0.9% | | **Tea Beverages** | 5,616.3 | - | | **Juice** | 1,746.6 | +1.3% | | **Milk Tea** | - | +13.1% | - In the tea beverage business, **"Uni-President Iced Tea"** and **"Uni-President Green Tea"** performed stably, **"Xiao Ming Tong Xue"** sales were weaker, and newly launched **"Tea King" sugar-free tea** and **"Tea Instant Fresh" refrigerated tea** jointly met high-end market demands[42](index=42&type=chunk) - The juice business achieved **1.3% growth** by signing idol **Wang Yuan** as the endorser for **"Uni-President Fresh Orange"**, attracting a new generation of consumers[51](index=51&type=chunk)[53](index=53&type=chunk) - The milk tea business achieved **double-digit growth for three consecutive years**, with **"Uni-President Assam Milk Tea"** maintaining its position as a category leader and continuing to be favored by consumers[63](index=63&type=chunk)[64](index=64&type=chunk) - In other beverages, the company focused on operating **"ALKAQUA" natural mineral water** and launched new products such as the premium refrigerated coffee **"Left Bank Coffee"** and sweet sake **"Qian Bai Du"**[71](index=71&type=chunk)[74](index=74&type=chunk)[84](index=84&type=chunk) [Research and Development](index=29&type=section&id=Research%20and%20Development) The Group's R&D center, guided by consumer demand, integrates innovation resources and focuses on value and category innovation; as of December 2019, it held **81 authorized patents** and **49 pending patent applications**, with food R&D deepening in Chinese cuisine, sterilization and preservation, and self-heating technologies, leading to new flavors for **"Kai Xiao Zao"** and the upgraded **"Master Kong Soup Noodle Extreme Flavor"** series, while beverage R&D aligned with health trends by upgrading **"Tea King" sugar-free tea**, and core technologies like original broth processing and segmented sterilization were successfully applied to new products - As of December 2019, the R&D center held **81 authorized patents** and **49 pending patent applications**, continuously building technological barriers[86](index=86&type=chunk) - Food R&D focused on extending the **"Kai Xiao Zao" self-heating meal product line**, launching the upgraded **"Master Kong Soup Noodle Extreme Flavor"** series, and the newly introduced **"Uni-President Qie Huang" tomato and egg noodles**[86](index=86&type=chunk)[87](index=87&type=chunk) - Beverage R&D prioritized health trends, comprehensively upgrading **"Tea King"** and launching two sugar-free teas[92](index=92&type=chunk) [Food Safety](index=32&type=section&id=Food%20Safety) The Group upholds the "Three Goods and One Fair" philosophy, establishing a Food Safety Committee and Center to promote a food safety culture; by improving supply chain oversight, managing suppliers at the source, and introducing third-party evaluations, the company ensures quality and safety from raw materials to finished products, with its Food Safety Testing Center accredited by CNAS, and **27 subsidiaries ISO9001 certified** and **25 ISO22000 certified**, guaranteeing product safety and deliciousness - The Group established a Food Safety Committee and Food Safety Center, dedicated to promoting food safety culture, building assurance systems, and formulating policies[95](index=95&type=chunk) - The Group continuously improved raw material supply chain oversight, implemented supplier qualification reviews and on-site evaluations, and actively promoted source management for suppliers[97](index=97&type=chunk)[98](index=98&type=chunk) - As of 2019, **27 subsidiaries** of the Group had obtained **ISO9001 certification**, and **25 subsidiaries** had obtained **ISO22000 certification**[99](index=99&type=chunk) [Production Strategies](index=33&type=section&id=Production%20Strategies) To achieve resource focus and maximize efficiency, the Group maintains its own production capacity while forming long-term strategic alliances with professional beverage co-manufacturers, including independent third parties and associated enterprises; this collaborative model allows the Group to flexibly adjust capacity through outsourced production beyond its basic capacity, thereby more effectively allocating resources to core operational areas such as product R&D, brand building, and sales channel development - In addition to its own production capacity, the Group maintains long-term strategic alliances with professional beverage co-manufacturers (including external independent third parties and associated enterprises) to adjust capacity, focusing resources and maximizing efficiency[99](index=99&type=chunk)[100](index=100&type=chunk) [Financial Results](index=34&type=section&id=Financial%20Results) For the year 2019, the Group reported revenue of **RMB 22,019.7 million**, a **1.1% year-on-year increase**; gross profit grew by **8.6%** to **RMB 7,918.3 million**, with gross margin improving from **33.5% to 36.0%** due to product structure optimization, lower raw material prices, and tax reduction policies; operating profit significantly increased by **35.6%** to **RMB 1,806.3 million**, and profit attributable to equity holders was **RMB 1,366.2 million**, up **32.7%**, with earnings per share at **RMB 31.63 cents** 2019 Key Financial Data | Indicator | 2019 (RMB Million) | 2018 (RMB Million) | Year-on-Year Change | | :--- | :--- | :--- | :--- | | **Revenue** | 22,019.7 | 21,772.2 | +1.1% | | **Gross Profit** | 7,918.3 | 7,288.6 | +8.6% | | **Gross Margin** | 36.0% | 33.5% | +2.5pp | | **Operating Profit** | 1,806.3 | 1,331.9 | +35.6% | | **Profit Attributable to Equity Holders** | 1,366.2 | 1,029.7 | +32.7% | | **Earnings Per Share (RMB Cents)** | 31.63 | 23.84 | +32.7% | - The increase in gross margin was primarily due to the Group's continuous optimization of product structure, a decline in raw material prices, and the implementation of a series of tax reduction and fee cut policies by the Chinese government[100](index=100&type=chunk) - Selling and marketing expenses increased to **RMB 5,367.6 million** due to increased channel and brand promotion investments, while administrative expenses decreased to **RMB 1,007.2 million** due to lower value-added tax and reduced surcharges[100](index=100&type=chunk) [Financial Analysis](index=35&type=section&id=Financial%20Analysis) As of the end of 2019, the Group's cash and bank balances increased to **RMB 6,483.5 million**, and total financial liabilities decreased by **39.3%** to **RMB 1,207.1 million**; the capital gearing ratio improved from **-31.78% to -63.14%**, indicating a further strengthened net cash position, with capital expenditure at **RMB 409.0 million** primarily for equipment upgrades, and inventory turnover days increasing from **33 to 41 days** mainly due to early stocking for increased production and sales during the Spring Festival Capital Gearing Ratio (As at December 31) | Indicator (RMB '000) | 2019 | 2018 | | :--- | :--- | :--- | | **Total Borrowings (including lease liabilities)** | 1,207,108 | 1,987,726 | | **Less: Cash and Bank Balances** | (6,483,500) | (5,176,478) | | **Net Cash** | (5,276,392) | (3,188,752) | | **Total Equity** | 13,632,930 | 13,222,307 | | **Capital Gearing Ratio** | (63.14%) | (31.78%) | Key Turnover Days (For the Year Ended December 31) | Indicator | 2019 (Days) | 2018 (Days) | | :--- | :--- | :--- | | **Trade Receivables Turnover Days** | 9 | 9 | | **Inventory Turnover Days** | 41 | 33 | | **Trade Payables Turnover Days** | 42 | 37 | - Capital expenditure in 2019 was **RMB 409.0 million**, a year-on-year decrease, primarily used for purchasing upgraded equipment and R&D equipment investments[109](index=109&type=chunk)[110](index=110&type=chunk) - The Group sold approximately **9%** of its equity in Wandashan Dairy in December 2019 for **RMB 334 million**, generating a post-tax gain of **RMB 92.1 million**[117](index=117&type=chunk) [Human Resources and Remuneration Policy](index=40&type=section&id=Human%20Resources%20and%20Remuneration%20Policy) As of the end of 2019, the Group had **29,494 employees**; the company adheres to a strategy of "lean staffing and merit-based employment," enhancing team capabilities through internal training and job rotation, primarily promoting from within, with remuneration policies determined by employee performance, qualifications, and market conditions, and a performance bonus plan in place, resulting in a total annual employee cost of **RMB 3,416.1 million** - As of December 31, 2019, the Group had a total of **29,494 employees**[119](index=119&type=chunk) - The total employee cost for the year (including directors' emoluments) was **RMB 3,416.1 million**[118](index=118&type=chunk)[119](index=119&type=chunk) [Report of the Directors](index=41&type=section&id=Report%20of%20the%20Directors) This report details the Group's principal activities, proposed dividend distribution, ongoing connected transactions with major shareholders, and the anticipated impact of the COVID-19 pandemic - The Group's principal businesses are the production and sale of beverages and instant noodles in China[120](index=120&type=chunk) - The Board recommended a final dividend of **RMB 31.63 cents per share** for the year ended December 31, 2019, totaling approximately **RMB 1,366.2 million**[120](index=120&type=chunk) - The report disclosed continuing connected transactions with major shareholder Uni-President Enterprises Corporation (UPE) and its group, including sales, procurement, logistics services, and technical support service agreements, confirming that transaction amounts did not exceed annual caps[139](index=139&type=chunk)[141](index=141&type=chunk)[142](index=142&type=chunk)[144](index=144&type=chunk)[146](index=146&type=chunk)[148](index=148&type=chunk) - Following the reporting period, the **COVID-19 pandemic** emerged, and the Group anticipates temporary and limited impacts on transportation and production costs in some regions, though no significant impact was identified as of the report date[181](index=181&type=chunk)[184](index=184&type=chunk) [Directors' Profile](index=62&type=section&id=Directors'%20Profile) This section provides detailed biographies of the executive, non-executive, and independent non-executive directors, including their age, position, industry experience, other listed company appointments, and educational backgrounds - This section provides detailed biographies of the executive directors, non-executive directors, and independent non-executive directors, including their age, position, industry experience, appointments in other listed companies, and educational backgrounds[187](index=187&type=chunk)[189](index=189&type=chunk)[191](index=191&type=chunk)[193](index=193&type=chunk)[195](index=195&type=chunk) [Senior Management's Profile](index=69&type=section&id=Senior%20Management's%20Profile) This section provides detailed biographies of the company's senior management team members, including the general manager, CFO, heads of various business units, and the company secretary, covering their personal backgrounds, tenure within the Group, and professional experience - This section provides detailed biographies of the company's senior management team members, including the general manager, CFO, heads of various business units, and the company secretary, covering their personal backgrounds, tenure within the Group, and professional experience[196](index=196&type=chunk)[197](index=197&type=chunk)[198](index=198&type=chunk)[200](index=200&type=chunk) [Corporate Governance Report](index=71&type=section&id=Corporate%20Governance%20Report) The company confirms compliance with all code provisions of the HKEX Corporate Governance Code for 2019, with a Board comprising eight directors meeting independence requirements, and details the composition, responsibilities, and meeting frequency of its Audit, Nomination, Remuneration, and Investment, Strategy & Development Committees, while also affirming the effectiveness of its risk management and internal control systems - The company confirmed its compliance with all code provisions of the **Hong Kong Stock Exchange's Corporate Governance Code** for the year 2019[202](index=202&type=chunk) - The Board comprises **8 directors**, including **2 executive directors**, **2 non-executive directors**, and **4 independent non-executive directors**, meeting the requirement that independent non-executive directors constitute at least one-third of the Board[203](index=203&type=chunk)[205](index=205&type=chunk) - The Board has established an Audit Committee, Nomination Committee, Remuneration Committee, and Investment, Strategy & Development Committee, with detailed explanations of each committee's composition, responsibilities, and annual meeting frequency[204](index=204&type=chunk)[211](index=211&type=chunk)[215](index=215&type=chunk)[221](index=221&type=chunk)[223](index=223&type=chunk) - The report outlines the company's risk management and internal control systems, which the Board has reviewed annually and deemed effective and adequate[226](index=226&type=chunk)[227](index=227&type=chunk) [Independent Auditor's Report](index=89&type=section&id=Independent%20Auditor's%20Report) PricewaterhouseCoopers, the auditor, concluded that the consolidated financial statements fairly and accurately reflect the Group's financial position as of December 31, 2019, and its financial performance and cash flows for the year then ended, in accordance with Hong Kong Financial Reporting Standards and the disclosure requirements of the Hong Kong Companies Ordinance, while identifying revenue recognition from goods sales and deferred income tax assets as key audit matters due to their complexity and judgment involved - Auditor PricewaterhouseCoopers believes that the consolidated financial statements truly and fairly reflect the Group's consolidated financial position as of December 31, 2019, and its financial performance and cash flows for the year then ended, prepared in compliance with **Hong Kong Financial Reporting Standards** and the disclosure requirements of the **Hong Kong Companies Ordinance**[240](index=240&type=chunk)[242](index=242&type=chunk) - The report identified two key audit matters: 1. **Revenue recognition: sales of goods** - highlighted due to the significant volume of transactions, diverse product range, and numerous customers[244](index=244&type=chunk) 2. **Deferred income tax assets** - noted for complexity and judgment involved in confirming recognition, which requires forecasting future taxable income[247](index=247&type=chunk) [Consolidated Financial Statements](index=98&type=section&id=Consolidated%20Financial%20Statements) This section presents the Group's comprehensive financial statements, including the consolidated income statement, balance sheet, and cash flow statement, providing a detailed overview of its financial performance and position [Consolidated Income Statement](index=100&type=section&id=Consolidated%20Income%20Statement) For the year 2019, the company's revenue was **RMB 22.02 billion**, a **1.1% year-on-year increase**; gross profit was **RMB 7.92 billion**, up **8.6%**; operating profit was **RMB 1.81 billion**, a **35.6% increase**; and profit for the year was **RMB 1.37 billion**, growing by **32.7%** Consolidated Income Statement Summary | Item (RMB '000) | 2019 | 2018 | | :--- | :--- | :--- | | **Revenue** | 22,019,737 | 21,772,240 | | **Cost of Sales** | (14,101,447) | (14,483,641) | | **Gross Profit** | 7,918,290 | 7,288,599 | | **Operating Profit** | 1,806,321 | 1,331,925 | | **Profit Before Income Tax** | 1,971,360 | 1,539,774 | | **Income Tax Expense** | (605,148) | (510,070) | | **Profit for the Year** | 1,366,212 | 1,029,704 | [Consolidated Balance Sheet](index=102&type=section&id=Consolidated%20Balance%20Sheet) As of the end of 2019, the company's total assets were **RMB 21.76 billion**, largely consistent with the previous year; total liabilities decreased to **RMB 8.12 billion**, and total equity increased to **RMB 13.63 billion**, with non-current assets increasing and current assets decreasing Consolidated Balance Sheet Summary (As at December 31) | Item (RMB '000) | 2019 | 2018 | | :--- | :--- | :--- | | **Total Assets** | **21,757,042** | **21,732,558** | | Non-current Assets | 14,739,130 | 14,082,292 | | Current Assets | 7,017,912 | 7,650,266 | | **Total Equity** | **13,632,930** | **13,222,307** | | **Total Liabilities** | **8,124,112** | **8,510,251** | | Non-current Liabilities | 483,010 | 420,749 | | Current Liabilities | 7,641,102 | 8,089,502 | [Consolidated Cash Flow Statement](index=105&type=section&id=Consolidated%20Cash%20Flow%20Statement) In 2019, net cash inflow from operating activities was **RMB 2.87 billion**, net cash outflow from investing activities was **RMB 1.47 billion**, and net cash outflow from financing activities was **RMB 1.91 billion**; this resulted in a net decrease in cash and cash equivalents of **RMB 506 million**, with an ending balance of **RMB 1.06 billion** Consolidated Cash Flow Statement Summary | Item (RMB '000) | 2019 | 2018 | | :--- | :--- | :--- | | **Net Cash Generated from Operating Activities** | 2,869,341 | 2,563,204 | | **Net Cash Used in Investing Activities** | (1,469,822) | (3,389,508) | | **Net Cash (Used in) / From Financing Activities** | (1,905,391) | 33,085 | | **Net Decrease in Cash and Cash Equivalents** | (505,872) | (793,219) | | **Cash and Cash Equivalents at Beginning of Year** | 1,563,945 | 2,356,350 | | **Cash and Cash Equivalents at End of Year** | 1,056,780 | 1,563,945 |

[Chairman's Statement](index=7&type=section&id=Chairman's%20Statement) Uni-President China achieved robust 2018 performance with 4.6% revenue growth and 17.2% profit after tax increase, driven by innovation and strong core brands Key Financial Indicators | Indicator | 2018 (RMB) | YoY Growth | | :--- | :--- | :--- | | Revenue | 21.772 billion | +4.6% | | Profit After Tax | 1.030 billion | +17.2% | - To address consumption upgrades and lifestyle changes, the Group launched several innovative products in 2018, including self-heating hotpot and meals, casual snacks, chilled tea and juice, and entered the plant-based protein (soy milk) sector[15](index=15&type=chunk)[18](index=18&type=chunk) - Core brands performed strongly, with **Tang Da Ren** revenue showing stable growth and improving product structure; **Uni-President Assam** milk tea maintained its leading position in the category[16](index=16&type=chunk)[19](index=19&type=chunk) - The Board recommends a final cash dividend of **RMB 23.84 cents per share** for the year ended December 31, 2018, totaling approximately **RMB 1.030 billion**[20](index=20&type=chunk)[23](index=23&type=chunk) [Management Discussion and Analysis](index=9&type=section&id=Management%20Discussion%20%26%20Analysis) This section analyzes the 2018 macroeconomic environment, industry trends, and reviews the operational performance, brand strategies, and product innovations across the food and beverage segments [Economic Environment](index=9&type=section&id=Economic%20Environment) China's GDP grew by 6.6% in 2018, meeting targets, but quarterly growth slowed, while the food and beverage industry faced price adjustments and weakening demand - China's GDP grew by **6.6%** year-on-year in 2018, aligning with the annual target of approximately 6.5%, though quarterly growth showed a declining trend, with the fourth quarter at 6.4%[28](index=28&type=chunk) - The food and beverage industry adjusted channel prices in 2018 due to rising raw material costs in 2017; however, market demand weakened from the third quarter, slowing industry revenue growth[29](index=29&type=chunk) - Consumption trends exhibited polarization: the instant noodle market diversified towards both lower-end and higher-priced products, while the beverage market saw a renewed preference for classic products[29](index=29&type=chunk) [Business Review](index=10&type=section&id=Business%20Review) In 2018, the Group's total revenue reached RMB 21.772 billion, a 4.6% year-on-year increase, with food business revenue at RMB 8.425 billion (up 5.7%) and beverage business revenue at RMB 12.619 billion (up 3.6%) 2018 Business Segment Revenue | Business Segment | 2018 Revenue (RMB million) | YoY Growth Rate | % of Total Revenue | | :--- | :--- | :--- | :--- | | Food Business | 8,425.1 | +5.7% | 38.7% | | Beverages Business | 12,619.4 | +3.6% | 58.0% | | **Total** | **21,772.2** | **+4.6%** | **96.7%** | [Food Business](index=10&type=section&id=Food%20Business) Food business revenue reached RMB 8.425 billion in 2018, a 5.7% year-on-year increase, primarily driven by double-digit growth in the mid-to-high-priced brand "Tang Da Ren" - Instant noodle business revenue recorded **RMB 8.425 billion**, a **5.7%** year-on-year increase, with the **Tang Da Ren** brand continuing double-digit growth, becoming the primary engine for business expansion[38](index=38&type=chunk)[43](index=43&type=chunk) - The high-end brand **Man Han Da Can** focused on "Taiwanese semi-tendon and semi-meat beef noodles," aiming to develop the exquisite high-priced noodle market[45](index=45&type=chunk) - The Group entered the self-heating food sector, launching self-heating hotpot **Zhu Shi Guang** and self-heating meals **Kai Xiao Zao**, to meet consumer demand for convenient meals in various scenarios[48](index=48&type=chunk) [Beverages Business](index=13&type=section&id=Beverages%20Business) Beverage business revenue in 2018 was RMB 12.619 billion, a 3.6% year-on-year increase, with strong performance in milk tea driven by "Assam" 2018 Beverage Category Revenue | Beverage Category | 2018 Revenue (RMB million) | YoY Growth Rate | | :--- | :--- | :--- | | Tea Beverages | 5,943.7 | +2.0% | | Juice | 1,723.4 | N/A | | Milk Tea | N/A | +13.6% | | Packaged Water (Aqua) | N/A | +12.9% | - Classic tea beverages **Uni-President Iced Black Tea** and **Uni-President Green Tea** drove growth in the tea beverage segment through marketing activities aligned with youth trends[53](index=53&type=chunk)[56](index=56&type=chunk)[58](index=58&type=chunk) - The company actively expanded into new categories, launching plant-based protein beverage **Cheng Shi Dou** soy milk and high-end bottle can series (e.g., **Man Ya** coffee, **Chuan Qi** tea), exploring the high-end market[97](index=97&type=chunk)[98](index=98&type=chunk) [Research and Development](index=21&type=section&id=Research%20and%20Development) This section details the company's efforts in R&D innovation and food safety assurance, including patent achievements, new product development, and comprehensive quality control systems [R&D](index=21&type=section&id=R%26D) In 2018, the Group's R&D center continued to innovate, holding 59 authorized patents and 56 pending patent applications by year-end - As of December 2018, the R&D center held **59 authorized patents** and **56 pending patent applications**, continuously strengthening its technological advantage[105](index=105&type=chunk) - Innovative development of self-heating dishes **Kai Xiao Zao**, which authentically restore the "wok hei" of Chinese cooking by controlling five key processes[107](index=107&type=chunk)[109](index=109&type=chunk) - Launched a chilled cup series, including **Tea•Instant Fresh** and **Fruit Symphony**, with a shelf life of only 21 days and full cold chain transportation, maximizing product freshness and taste[113](index=113&type=chunk)[115](index=115&type=chunk) [Food Safety](index=23&type=section&id=Food%20Safety) The Group prioritizes food safety, establishing a Food Safety Committee and Center to build a comprehensive monitoring system from supply chain to finished products - The Group established a Food Safety Committee and Food Safety Center, dedicated to the construction of food safety assurance systems, policy formulation, and risk monitoring[119](index=119&type=chunk) - The Group's Food Safety Testing Center has annually passed expert reviews by the China National Accreditation Service for Conformity Assessment (CNAS) since 2005[125](index=125&type=chunk) - As of the end of 2018, **29** of the Group's subsidiaries had passed ISO9001 quality management system certification, and **27** subsidiaries had passed ISO22000 food safety management system certification[127](index=127&type=chunk) [Production Strategies](index=24&type=section&id=Production%20Strategies) The Group employs a strategy combining proprietary production capacity with outsourced manufacturing, forming long-term strategic alliances with professional co-packers to optimize resource allocation - The Group adopts a production strategy combining proprietary capacity with professional co-packing, forming strategic alliances with external independent third parties and affiliated enterprises to flexibly adjust production capacity[128](index=128&type=chunk) [Financial Review](index=24&type=section&id=Financial%20Review) This section provides a comprehensive review of the Group's 2018 financial performance, highlighting revenue and profit growth, improved gross margin, and a strong net cash position [Financial Results](index=24&type=section&id=Financial%20Results) For the year ended December 31, 2018, the Group's revenue was RMB 21.772 billion, a 4.6% year-on-year increase, with gross profit up 10.8% to RMB 7.289 billion Financial Performance Summary | Financial Indicator (RMB million) | 2018 | 2017 (Restated) | YoY Change | | :--- | :--- | :--- | :--- | | Revenue | 21,772.2 | 20,821.9 | +4.6% | | Gross Profit | 7,288.6 | 6,576.9 | +10.8% | | Gross Profit Margin | 33.5% | 31.6% | +1.9 p.p. | | Operating Profit | 1,331.9 | 1,186.6 | +12.2% | | Profit Attributable to Equity Holders | 1,029.7 | 878.2 | +17.2% | | Earnings Per Share (RMB cents) | 23.84 | 20.33 | +17.3% | [Financial Analysis](index=25&type=section&id=Financial%20Analysis) As of the end of 2018, the Group held RMB 5.177 billion in cash and bank balances, with total financial liabilities of RMB 1.988 billion, maintaining a net cash position Key Financial Ratios | Indicator | 2018 | 2017 | | :--- | :--- | :--- | | Total Borrowings (RMB thousand) | 1,987,726 | 1,334,768 | | Net Cash (RMB thousand) | (3,188,752) | (1,447,963) | | Gearing Ratio | (31.78%) | (12.74%) | Turnover Days | Turnover Days | 2018 | 2017 | | :--- | :--- | :--- | | Trade Receivables | 9 | 9 | | Inventories | 33 | 30 | | Trade Payables | 37 | 32 | - Net cash inflow from operating activities in 2018 was **RMB 2.563 billion**, with capital expenditure of **RMB 986 million**, primarily for equipment upgrades, channel marketing asset deployment, and R&D investments[148](index=148&type=chunk) [Significant Investments and Future Plans](index=29&type=section&id=Significant%20Investments%20and%20Future%20Plans) As of the end of 2018, the Group held financial assets at fair value through other comprehensive income of RMB 219 million, primarily equity investments in Haishun Fruit Juice Holdings and Wandashan Dairy - The Group holds equity investments in Haishun Fruit Juice Holdings Co Ltd (listed) and Heilongjiang Wandashan Dairy Co Ltd (unlisted), with a total fair value of approximately **RMB 219 million**[164](index=164&type=chunk) - There were no significant acquisitions or disposals of subsidiaries, associates, or joint ventures during the year[174](index=174&type=chunk)[178](index=178&type=chunk) [Human Resources](index=31&type=section&id=Human%20Resources%20and%20Remuneration%20Policy) As of the end of 2018, the Group employed 29,192 individuals, with total annual staff costs of RMB 3.217 billion, emphasizing talent development and performance-based remuneration Human Resources Overview | Indicator | 2018 | 2017 | | :--- | :--- | :--- | | Total Employees | 29,192 | N/A | | Total Staff Costs (RMB million) | 3,217.4 | 3,025.2 | [Report of the Directors](index=32&type=section&id=Report%20of%20the%20Directors) This report outlines the company's principal activities, financial performance, dividend policy, directors' and shareholders' interests, connected transactions, corporate governance, and business risks [Principal Activities and Financial Overview](index=32&type=section&id=Principal%20Activities%20and%20Financial%20Overview) The company is an investment holding company, with the Group's primary business being the production and sale of beverages and instant noodles in China - The Group's principal activities are the production and sale of beverages and instant noodles in China[190](index=190&type=chunk) - The Board recommends a final dividend of **RMB 23.84 cents per share** for the year, totaling approximately **RMB 1.03 billion**[193](index=193&type=chunk) [Directors' and Substantial Shareholders' Interests](index=34&type=section&id=Directors'%20and%20Substantial%20Shareholders'%20Interests) This section discloses the shareholdings of directors and substantial shareholders in the company and its associated corporations Major Shareholders' Interests | Major Shareholder | Capacity | Number of Shares Held (Long Position) | Approximate Percentage of Shareholding | | :--- | :--- | :--- | :--- | | Uni-President Enterprises Corporation | Interest in controlled corporation | 3,050,893,983 | 70.63% | | Cayman President Holdings Ltd. | Beneficial owner | 3,044,508,000 | 70.49% | [Continuing Connected Transactions](index=39&type=section&id=Continuing%20Connected%20Transactions) During the reporting period, the Group engaged in various continuing connected transactions with the controlling shareholder, Uni-President Enterprises Group, all conducted on normal commercial terms and within approved annual caps Continuing Connected Transactions with Uni-President Enterprises Group | Transaction Type (with Uni-President Enterprises Group) | 2018 Actual Transaction Amount (RMB million) | 2018 Annual Cap (RMB million) | | :--- | :--- | :--- | | Sales of Products | 79.4 | 296.0 | | Purchases of Goods | 3,547.4 | 4,920.0 | | Logistics Services | 19.5 | 39.0 | | Technical Support Services | 51.3 | 59.0 | [Business Review and Risk Factors](index=47&type=section&id=Business%20Review%20and%20Risk%20Factors) This section reviews the Group's business performance and identifies key risks and uncertainties, including changes in consumer preferences, intense market competition, macroeconomic fluctuations, and supply chain risks - The Group faces key risks including: changes in consumer preferences, market competition, economic and financial market fluctuations, and supply chain disruptions[304](index=304&type=chunk)[308](index=308&type=chunk)[310](index=310&type=chunk)[311](index=311&type=chunk)[317](index=317&type=chunk) - The company adopted a dividend policy on December 31, 2018, targeting a final dividend payout of not less than **20%** of the consolidated profit attributable to shareholders[331](index=331&type=chunk)[335](index=335&type=chunk) [Corporate Governance Report](index=61&type=section&id=Corporate%20Governance%20Report) This report details the company's corporate governance practices in 2018, emphasizing adherence to the Corporate Governance Code and outlining the board's structure, responsibilities, and committee functions [Board of Directors and Committees](index=61&type=section&id=Board%20of%20Directors%20and%20Committees) The Board of Directors, comprising executive, non-executive, and independent non-executive directors, leads and oversees the company, supported by four specialized committees Board Committees and Key Responsibilities | Committee | Chairman | Key Responsibilities | | :--- | :--- | :--- | | Audit Committee | Mr. Fan Jen-Da (Independent Non-executive Director) | Oversees financial reporting, internal controls, and external auditors | | Nomination Committee | Mr. Lu Chia-Hsing (Independent Non-executive Director) | Reviews board structure, identifies, and nominates director candidates | | Remuneration Committee | Mr. Chen Sheng-Te (Independent Non-executive Director) | Formulates remuneration policies and structures for directors and senior management | | Investment, Strategy and Development Committee | Mr. Lo Chih-Hsien (Chairman) | Reviews the Group's investment and development plans and policies | - The company adopted a board diversity policy, considering various factors such as gender, age, cultural background, skills, and experience when selecting directors[430](index=430&type=chunk)[433](index=433&type=chunk) [Risk Management and Internal Control](index=72&type=section&id=Risk%20Management%20and%20Internal%20Control) The Board is responsible for maintaining a robust risk management and internal control system designed to identify and manage significant risks and safeguard assets - The Board is overall responsible for maintaining the Group's risk management and internal control systems, conducting annual effectiveness reviews[450](index=450&type=chunk)[457](index=457&type=chunk) - The Group established an internal audit unit, reporting to the Board, operating under the guidance of the Audit Committee, and regularly reporting audit findings and internal control recommendations to the Board[458](index=458&type=chunk) [Communication with Shareholders and Shareholders' Rights](index=75&type=section&id=Communication%20with%20Shareholders%20and%20Shareholders'%20Rights) The company communicates with shareholders through various channels, including annual general meetings, announcements, and its website, ensuring shareholders can effectively participate in corporate governance - Shareholders holding not less than **one-tenth** of the paid-up share capital may request to convene an extraordinary general meeting[471](index=471&type=chunk) [Financial Statements](index=78&type=section&id=Financial%20Statements) This section comprises the Independent Auditor's Report by PricewaterhouseCoopers, the Group's Consolidated Financial Statements (including income statement, comprehensive income statement, balance sheet, statement of changes in equity, and cash flow statement), and detailed notes [Independent Auditor's Report](index=78&type=section&id=Independent%20Auditor's%20Report) PricewaterhouseCoopers issued an unmodified opinion on the Group's consolidated financial statements for the year ended December 31, 2018, confirming their fair presentation and compliance with disclosure requirements - The auditor, PricewaterhouseCoopers, issued an **unmodified opinion** on the consolidated financial statements[492](index=492&type=chunk) - Key Audit Matters identified were: - Revenue recognition: sales of goods - Deferred income tax assets[499](index=499&type=chunk) [Consolidated Financial Statements](index=87&type=section&id=Consolidated%20Financial%20Statements) This section presents the Group's core financial statements for the year ended December 31, 2018, including the consolidated income statement, comprehensive income statement, balance sheet, statement of changes in equity, and cash flow statement Consolidated Income Statement Summary (RMB thousand) | Indicator | 2018 | 2017 (Restated) | | :--- | :--- | :--- | | Revenue | 21,772,240 | 20,821,949 | | Gross Profit | 7,288,599 | 6,576,938 | | Operating Profit | 1,331,925 | 1,186,611 | | Profit for the Year | 1,029,704 | 878,216 | Consolidated Balance Sheet Summary (RMB thousand) | Indicator | December 31, 2018 | December 31, 2017 | | :--- | :--- | :--- | | Total Assets | 21,732,558 | 20,036,552 | | Total Liabilities | 8,510,251 | 7,221,075 | | Total Equity | 13,222,307 | 12,815,477 | Consolidated Cash Flow Statement Summary (RMB thousand) | Indicator | 2018 | 2017 | | :--- | :--- | :--- | | Net Cash Generated from Operating Activities | 2,563,204 | 2,452,763 | | Net Cash Used in Investing Activities | (3,389,508) | (782,159) | | Net Cash Generated From/(Used In) Financing Activities | 33,085 | (1,384,336) | | Net (Decrease)/Increase in Cash and Cash Equivalents | (793,219) | 286,268 | [Notes to the Consolidated Financial Statements](index=94&type=section&id=Notes%20to%20the%20Consolidated%20Financial%20Statements) This section provides detailed explanations and supplementary information to the consolidated financial statements, covering key accounting policies, estimates, segment information, asset and liability breakdowns, and related party transactions - The Group adopted Hong Kong Financial Reporting Standard 9 "Financial Instruments" and Standard 15 "Revenue from Contracts with Customers" effective January 1, 2018; Standard 15 was adopted using the full retrospective method, and comparative figures for 2017 were restated accordingly[577](index=577&type=chunk)[613](index=613&type=chunk) Segment Revenue (RMB thousand) | Segment Revenue (RMB thousand) | 2018 | 2017 (Restated) | | :--- | :--- | :--- | | Beverages | 12,619,416 | 12,179,014 | | Instant Noodles | 8,425,149 | 7,974,498 | | Others | 727,675 | 668,437 | | **Total** | **21,772,240** | **20,821,949** | - Significant transactions were conducted with related parties (primarily the controlling company Uni-President Enterprises and its subsidiaries), including raw material purchases (approximately **RMB 4.20 billion**) and finished product sales (approximately **RMB 84 million**)[1230](index=1230&type=chunk)