HAID GROUP(SZ:002311)2022-09-20 16:00Risk Management - The company reported significant risks related to abnormal weather affecting the feed industry, which could lead to fluctuations in livestock numbers and feed demand [2]. - The ongoing COVID-19 pandemic has caused disruptions in operations, impacting the livestock and feed sectors due to reduced consumer demand and operational challenges [4]. - The company has a comprehensive strategy to mitigate risks from animal diseases, including a diverse range of feed products and a strict disease prevention system [5]. - Fluctuations in raw material prices, particularly for corn and soybean meal, pose a risk to feed and farming costs, necessitating strategic procurement and risk management [6]. - The company is closely monitoring raw material market trends to optimize procurement strategies and manage costs effectively [6]. - The company is actively managing foreign exchange risks by carefully selecting settlement currencies and using financial instruments to hedge against currency fluctuations [9]. - The company has implemented measures to control exchange rate risks through careful selection of settlement currencies and the use of financial instruments like forward contracts [80]. - The company has established a comprehensive risk management system for its hedging activities, ensuring compliance with national laws and regulations [62]. Financial Performance - The company's operating revenue for the first half of 2022 was CNY 46.33 billion, an increase of 21.30% compared to CNY 38.19 billion in the same period last year [19]. - The net profit attributable to shareholders decreased by 40.07% to CNY 918.53 million from CNY 1.53 billion year-on-year [19]. - The net cash flow from operating activities increased significantly by 309.88% to CNY 2.38 billion, compared to CNY 580.30 million in the previous year [19]. - Total assets at the end of the reporting period reached CNY 43.39 billion, up 21.71% from CNY 35.65 billion at the end of the previous year [19]. - The net profit margin decreased, with a weighted average return on equity of 6.15%, down from 10.68% in the previous year [19]. - The company’s revenue from non-operating income was reported at 13.42 million, after accounting for tax and minority interests [24]. - The company’s trading business for bulk raw materials achieved revenue of 4.208 billion yuan, a year-on-year growth of 33.12% [40]. - The company reported a total investment amount of 44,731.17 million yuan in derivative investments by the end of the reporting period, representing 2.68% of the company's net assets [61]. Research and Development - The company has invested heavily in research and development, with over 3,000 personnel dedicated to improving animal nutrition and feed formulation technology [6]. - The company has increased its investment in research and development, particularly in key technologies for microbial fermentation feed and alternatives to feed antibiotics [19]. - Research and development investment reached 330 million yuan, a nearly 40% increase year-on-year, focusing on seven major research directions [41]. - The company has a robust R&D team of over 3,000 people, investing heavily in research across seven key areas, ensuring rapid transformation of technological achievements into production capabilities [44]. Market Dynamics - New environmental regulations are reshaping the livestock industry, leading to the exit of smaller, non-compliant producers and impacting feed market dynamics [7]. - The feed industry is currently undergoing a consolidation phase, with 39 enterprises producing over one million tons annually, indicating a trend towards larger, more competitive firms [26]. - The company has expanded its market presence in Southeast Asia, Africa, and South America, positioning itself among the top ten global feed enterprises in terms of production and sales scale [30]. - The livestock industry in China saw a production increase of 16.3% in 2021, with pork production rising by 28.8% [25]. - The market for animal health products is expected to grow significantly, driven by rising consumer demand for health, safety, and green farming practices [27]. Operational Strategies - The company has expanded its factory layout across major aquaculture regions in China and Southeast Asia to mitigate risks from localized disruptions [3]. - The company emphasizes enhancing service capabilities for farmers through integrated solutions, which helps improve their resilience against risks [3]. - The company is focusing on expanding its production capacity in resource-rich areas to capture market share in new farming regions [19]. - The company has established a comprehensive aquaculture industry chain and is gradually building a livestock and poultry industry chain, focusing on feed, quality animal seedlings, animal health products, and pig farming [31]. - The company has adopted a dual procurement strategy for raw materials, combining centralized purchasing of bulk commodities with local sourcing to manage procurement risks effectively [77]. Environmental Compliance - The company has implemented various pollution control technologies, including wet dust removal and activated carbon adsorption, to ensure compliance with emission standards [95]. - The wastewater treatment process includes A/O and AAO technologies, achieving compliance before discharge [95]. - The company has established environmental emergency response plans in accordance with national laws to mitigate risks from environmental incidents [97]. - The company has maintained effective operation of pollution control facilities across all key subsidiaries [95]. - The company faced a fine of 50,000 yuan for violating air pollution prevention regulations, with no significant adverse impact on operations [98]. Shareholder Engagement - The company held its 2021 Annual General Meeting with a participation rate of 64.32% on May 9, 2022 [81]. - The first interim shareholders' meeting of 2022 had a participation rate of 73.18% on May 16, 2022 [81]. - The company plans not to distribute cash dividends, issue bonus shares, or convert capital reserves into share capital for the half-year period [84]. - The company has implemented multiple equity incentive plans to align the interests of management and shareholders, ensuring the execution of its strategic goals [48]. Challenges and Outlook - The company anticipates increased competition pressure and challenges in the feed industry due to rising raw material costs and declining consumer demand [36]. - The company is facing challenges in meeting expected production volumes due to rising raw material prices and pandemic-related impacts [66]. - The company has experienced fluctuations in demand for feed due to external factors such as weather and disease outbreaks, necessitating agile responses to market conditions [76]. - The company is closely monitoring the impact of environmental regulations on the livestock industry, adjusting its production capacity and market strategies accordingly [79].