NONGFU SPRING(09633)2024-04-18 14:24Company Overview - Nongfu Spring Co., Ltd. was established in 1996 and is a leader in the packaged drinking water and beverage industry in China[3] - The company was transformed into a joint stock company in June 2001 and listed on the Hong Kong Stock Exchange in September 2020 (stock code: 9633.HK)[3] - Nongfu Spring's major products include packaged drinking water, tea beverage, functional beverage, and juice beverage[3] - The company has a nationwide sales network covering all provinces, municipalities, and prefecture-level administrative divisions across China[4] - Nongfu Spring implements a multi-brand strategy and has built a super brand in the Chinese soft beverage market[4] - The company's registered office and headquarters are located at No. 181 Geyazhuang, Xihu District, Hangzhou, Zhejiang, PRC[8] - The principal place of business in Hong Kong is Room F, 6/F, CNT Tower, 338 Hennessy Road, Wan Chai, Hong Kong[11] - The company's website is www.nongfuspring.com[9] Financial Performance - Total revenue for 2023 reached RMB 42,667 million, a 28.4% increase from 2022[31] - Net profit attributable to owners of the parent in 2023 was RMB 12,079 million, up from RMB 8,495 million in 2022[31] - Operating cash flow in 2023 increased by 43.7% year-on-year to RMB 17,305 million[31] - The company proposed a final cash dividend of RMB 0.75 per share for 2023, totaling approximately RMB 8,435 million[31] - Gross profit for 2023 was RMB 25,407 million, compared to RMB 19,095 million in 2022[29] - Total assets as of December 31, 2023, were RMB 49,137 million, up from RMB 39,255 million in 2022[29] - Cash and bank balances at the end of 2023 stood at RMB 24,125 million, a significant increase from RMB 15,211 million in 2022[29] - Earnings per share for 2023 were RMB 1.07, compared to RMB 0.76 in 2022[29] - Total equity as of December 31, 2023, was RMB 28,571 million, up from RMB 24,084 million in 2022[29] - Revenue increased by 28.4% to RMB42,667 million in 2023 compared to RMB33,239 million in 2022[73] - Gross profit rose by 33.1% to RMB25,407 million in 2023 from RMB19,095 million in 2022[73] - Gross profit margin improved by 2.1 percentage points to 59.5% in 2023[73] - Selling and distribution expenses increased by 18.7% to RMB9,284 million in 2023, accounting for 21.8% of total revenue[74] - Profit for the year surged by 42.2% to RMB12,079 million in 2023 from RMB8,495 million in 2022[84] - Long-term bank deposits, pledged deposits, cash, and bank balances increased by 32.7% to RMB25,639 million as of December 31, 2023[86] - Inventories grew by 46.7% to RMB3,092 million as of December 31, 2023, with inventory turnover days increasing to 55.0 days[88] - Trade receivables and bills increased to RMB547 million as of December 31, 2023, with turnover days decreasing to 4.4 days[89] - Trade payables and bills rose to RMB1,770 million as of December 31, 2023, with turnover days increasing to 33.8 days[90] - Capital gearing ratio increased to 11.2% as of December 31, 2023, up from 10.5% in 2022[91] - Trade and bills receivables increased from RMB479 million in 2022 to RMB547 million in 2023, with turnover days decreasing from 5.2 days to 4.4 days[93] - Trade and bills payables increased from RMB1,425 million in 2022 to RMB1,770 million in 2023, with turnover days increasing from 33.3 days to 33.8 days[94] - The gearing ratio increased from 10.5% in 2022 to 11.2% in 2023, primarily due to increased use of bills receivable financing[95] - The Group held HK462 million, and other foreign currencies, with exchange gains of approximately RMB46 million in 2023[97] - Capital commitments amounted to approximately RMB4,437 million as of December 31, 2023, mainly for construction of production plants and purchase of production equipment[98] - The Group entered into an investment agreement for the "Nongfu Spring Jiande Drinking Water and Beverage Comprehensive Industrial Base Project" with a total investment of RMB5 billion[105] - As of December 31, 2023, the Group had utilized HK4,477 million remaining unutilized[111] - Brand building utilized HK1,341 million remaining unutilized and expected to be used by December 31, 2024[112] - Purchasing sales equipment utilized HK1,973 million remaining unutilized and expected to be used by December 31, 2024[112] - Purchasing production facilities and building new factories utilized HK437 million remaining unutilized and expected to be used by December 31, 2024[112] - The Group has adequate financial resources to continue its operation in the foreseeable future, prepared on a going concern basis[113][115] Product Performance - Packaged drinking water products accounted for 47.5% of total revenue, while beverage products accounted for 51.7% of total revenue in 2023[42] - Tea beverage products revenue increased to RMB12,659 million in 2023, representing 29.7% of total revenue, up from 20.8% in 2022[43] - Functional beverage products revenue was RMB4,902 million in 2023, maintaining an 11.5% share of total revenue[43] - Juice beverage products revenue was RMB3,533 million in 2023, accounting for 8.3% of total revenue[43] - Other products, including soda water and fresh fruits, contributed RMB1,311 million, representing 3.0% of total revenue in 2023[43] - The revenue from packaged drinking water products in 2023 was RMB20,262 million, a 10.9% increase compared to 2022, accounting for 47.5% of total revenue[45][46] - The tea beverage products revenue in 2023 was RMB12,659 million, an 83.3% increase compared to 2022, accounting for 29.7% of total revenue[52][53] - Functional beverage products revenue in 2023 was RMB4,902 million, a 27.7% increase compared to 2022, accounting for 11.5% of total revenue[57][58] - Juice beverage products revenue in 2023 was RMB3,533 million, a 22.7% increase compared to 2022, accounting for 8.3% of total revenue[59][60] - Other products revenue in 2023 was RMB1,311 million, a slight decrease of 3.1% compared to 2022, accounting for 3.0% of total revenue[62][63] Marketing and Branding - The company promoted high-quality water sources through advertisements and "Source-tracking" campaigns, emphasizing natural and healthy consumer perception[47][48] - During the Chinese New Year of 2023, the company launched a zodiac edition of natural mineral water and co-branded with Disney for limited edition products[49][50] - In the second half of 2023, the company upgraded the 4L "handle bottle" natural water product, focusing on ergonomic design and cooking convenience[51] - "Oriental Leaf" introduced new flavors and packaging, and launched a series of short films themed around the twenty-four solar terms to promote Chinese tea culture[54] - "Tea π" engaged in a creative label design collaboration with global illustrators and consumers, resulting in the "Tea π Yearbook 2023: Wonderful World Illustrations"[55] - "Scream" beverage collaborated with the Chinese University Basketball League to enhance its sports expertise connotation[57][58] - "Victory" vitamin water launched new prune and peach flavor and mixed pomelo flavor, and sponsored the V-Break Dance Battle[57][58] - "17.5°" juice launched seasonal fresh orange juice with a 36-hour integrated procedure from picking to bottling[59][60] - "Water Soluble C100" launched about 30,000,000 crossover editions with The Little Prince IP[61] - "TANBING" coffee launched 250ml mini-bottled coffee and exclusive jasmine tea coffee with Sam's Club[63][64] - "Big Lemon" beverages were launched in April 2023 with freshly squeezed lemon juice and retained lemon peel oil[63][64] - "Oriental Leaf" launched "Black Oolong Tea" with premium oolong tea from Northern Fujian[65][68] Corporate Governance - The company's 2022 Annual General Meeting was held on May 16, 2023, and the 2023 Annual General Meeting is scheduled for May 21, 2024[5] - H Shares were listed on the Hong Kong Stock Exchange on September 8, 2020[8] - The reporting period for the annual report is from January 1, 2023, to December 31, 2023[7] - The latest practicable date for the annual report is April 14, 2024[6] - The company renewed the Purchasing Framework Agreement with Yangshengtang on December 14, 2022[6] - The company renewed the Basic R&D and Test Service Framework Agreement with Yangshengtang and YST Natural Medicine Research on December 14, 2022[6] - The over-allotment option allows the company to issue up to 58,234,600 additional H Shares at the offer price[7] - The Board consists of nine members, including four executive directors, two non-executive directors, and three independent non-executive directors[152][154] - Mr. Zhong Shanshan serves as both Chairman and General Manager, a structure deemed beneficial for management[147][149] - The Board ensures a balance of power and authority with experienced and high-caliber individuals[150] - The Board is responsible for determining business strategies and investment plans, and implementing resolutions passed at Shareholders' general meetings[157] - The Board has established three special committees: Audit Committee, Nomination Committee, and Remuneration Committee[158] - The Company has set up the Office of Public Policy & Sustainable Development to assist in identifying and monitoring sustainable development risks[158] - The Chairman of the Board and General Manager roles are both performed by Mr. Zhong Shanshan[160] - The Board revised the Articles of Association and the Rules of Procedure during the Reporting Period[161] - The Office of Public Policy & Sustainable Development revised the Whistleblowing Policy and the Anti-Corruption Policy[161] - Mr. Zhong Shanshan, Ms. Wu Limin, Mr. Xiang Xiansong, and Ms. Han Linyou were elected as executive Directors of the eighth session of the Board[163] - Ms. Liu Min and Mr. Liu Xiyue were elected as shareholder representative Supervisors of the eighth session of the Supervisory Committee[164] - Mr. Rao Minghong was re-elected as the employee representative Supervisor of the eighth session of the Supervisory Committee on March 2, 2023[164] - The term of office for the eighth session of the Board and Supervisory Committee is three years commencing from the date of the 2022 AGM[163][164] - Mr. Zhong Shanshan was appointed as the chairman of the eighth session of the Board and General Manager of the Company on May 16, 2023[166] - Ms. Wu Limin was appointed as the Chief Financial Officer of the Company on May 16, 2023[166] - Mr. Xiang Xiansong was appointed as the General Manager of the Sales & Marketing Center of the Company on May 16, 2023[166] - Ms. Han Linyou was appointed as the Board Secretary of the Company on May 16, 2023[166] - Ms. Liu Min was appointed as the chairman of the eighth session of the Supervisory Committee on May 16, 2023[167] - Ms. Mak Po Man Cherie resigned as one of the joint company secretaries of the Company on February 13, 2024[167] - Ms. Han Linyou was appointed as the sole company secretary of the Company on February 13, 2024[167] - Ms. Xue Lian resigned as a non-executive Director of the Company in March 2024 due to family reasons[169] - Ms. Liu Min resigned as a Supervisor and the chairman of the Supervisory Committee of the Company in March 2024 due to changes of her work[169] - Mr. Rao Minghong resigned as a Supervisor of the Company in March 2024 due to adjustment of work[169] - The Company's Audit Committee consists of three independent non-executive directors, including Mr. Stanley Yi Chang, Mr. Yang Lei Bob, and Mr. Lu Yuan, with Mr. Stanley Yi Chang serving as the chairman[181] - The Audit Committee is responsible for reviewing and supervising the Company's financial information and reporting procedures, including the completeness of financial statements and reports[182] - The Company arranged orientation training for new Directors, Supervisors, and senior management to enhance their understanding of the Listing Rules and the Corporate Governance Code[177] - All Directors participated in continuous professional development by attending training courses, conducting business research, or reading materials on corporate governance and related topics[177] - The Company's senior management reported business activities and development information to all Directors on a timely basis during Board meetings[175] - The Company ensures that Directors can seek independent professional advice upon reasonable request, with expenses covered by the Company[177] - The Audit Committee advises the Board on the appointment, renewal, replacement, or dismissal of the external audit agency[182] - The Audit Committee reviews and supervises the independence and objectivity of the external audit agency and the effectiveness of audit procedures[182] - The Audit Committee formulates and implements policies for non-audit services provided by the external audit agency[182] - The Audit Committee monitors the relationship between the Company and the external audit agency[182] - The Audit Committee held 3 meetings during the reporting period with full attendance from all members[185][186] - The Audit Committee reviewed the interim report for the six months ended June 30, 2023, confirming compliance with accounting principles and adequate disclosures[187] - The Audit Committee reviewed the annual results for the year ended December 31, 2023, finding no material deficiencies in risk management or internal control[188] - The Audit Committee recommended re-appointing Pan-China Certified Public Accountants LLP as domestic auditors and Ernst & Young as overseas auditors for 2024[188] - The Nomination Committee comprises three directors, including one executive director and two independent non-executive directors[192] - The Nomination Committee is responsible for formulating nomination procedures and standards for director candidates[192] - The Nomination Committee evaluates candidates for directors and senior management, making recommendations to the Board[193] - The Nomination Committee assesses the independence of independent non-executive directors[193] - The Nomination Committee reviews the Board's structure, size, and composition annually, recommending changes aligned with corporate strategies[194] - The Board consists of 3 female and 6 male Directors, maintaining gender diversity[198] - The gender ratio of all employees (including senior management) is approximately 70% male to 30% female as of December 31, 2023[199] - The Nomination Committee held 1 meeting during the reporting period[200] - The Company has adopted a Board diversity policy considering factors like gender, age, culture, education background, professional experience, skills, knowledge, and length of service[197] - The Nomination Committee reviews the Board diversity policy annually to ensure its effectiveness[197] - The Company's diversity policy includes monitoring, reporting, and reviewing systems to ensure successful implementation[197] - The Nomination Committee believes the Board composition satisfies the diversity policy in terms of gender, age, cultural and educational background, professional experience, skills, knowledge, and length of service[197] - The Company will continue to maintain a diverse Board and fully consider gender in the selection and development of nominees[199] - The Nomination Committee and Human Resources Center will focus on maintaining and strengthening the concern, selection, and development of high-potential female talents[199] Sustainability and Social Responsibility - Water intensity reduced by 14% compared to 2020, achieving 70% of the 2030 strategic target[133] - All water and beverage production plants obtained ISO 14001 certification[132] - 99% of plastic packaging for water and beverage products is recyclable, aiming for 100% by 2025[137] - 100% of employees participated in customized training programs[139] - National-level random inspection qualification rate reached 100% in 2023[140] - 100% of products were recognized in third-party review and certification[140] - Wastewater treatment efficiency improved significantly after upgrading or expanding ten plant stations[136] - ISO 9001 and ISO 22000 (HACCP) certifications obtained by all plants[140] - Energy structure optimization and low-carbon logistics planning reduced value chain carbon emissions[134] - Nongfu Spring actively fulfills social responsibilities through charitable activities in disaster relief, poverty alleviation, education improvement, and public sports[141][143] - The company is committed to building a sustainable supply chain with policies on supplier lifecycle management, health, safety, and environmental standards[141][143] - Nongfu Spring aims to become a leader in sustainability while providing natural and healthy products[144] - The 2023 Sustainability Report was released alongside the Annual Report, available on the Stock Exchange and company websites[144] - The global situation in 2024 remains complex, with a focus on recovery and development[142][145] - The domestic consumer market is expected to maintain steady and positive recovery, presenting opportunities for the food and beverage industry[142][145] - The company will strengthen brand building and adapt to market changes while adhering to healthy and natural product concepts