宏华集团(00196) - 2023 - 年度财报

Chairman's Report The Chairman's report details 2023's improved operations and outlines a 2024 strategy for equipment, services, and sustainable growth Key Performance Indicators for 2023 | Metric | Amount (RMB) | YoY Growth | | :--- | :--- | :--- | | Operating Revenue | RMB 5.473 billion | +22.3% | | New Orders Signed | RMB 6.199 billion | +22.87% | - 2024 Strategic Focus: - Industrial Layout: Steadily strengthen equipment, optimize services, and expand related diversification[42] - Technological Development: Accelerate intelligent equipment, digital products, and green industry development[42] - Emerging Industries: Focus on marine resource development equipment, drilling and completion digital products, unconventional oil and gas extraction equipment, and integrated oil and gas field new energy applications[42] - Internal management will continue to deepen reforms, improve corporate governance, adhere to technology innovation leadership, accelerate production expansion, enhance quality and efficiency, and strengthen ESG management to promote green and sustainable development[43] Management Discussion and Analysis This section reviews 2023 market, business, R&D, HR, and financial performance, noting revenue growth, narrowed losses, and 2024 strategies Market Review In 2023, global oil prices fluctuated, upstream E&P spending rose 10.8%, and domestic oil/gas production grew, integrating with new energy - 2023 global upstream exploration and development capital expenditure was USD 565.2 billion, a 10.8% year-on-year increase, with energy investment trending towards low-carbon, digital, electrified, and intelligent solutions[147] - Domestic crude oil production grew for the fifth consecutive year, reaching 209 million tons (+2.0% year-on-year); natural gas production reached 229.71 billion cubic meters (+5.8% year-on-year); the National Energy Administration issued a plan requiring integrated development of oil and gas exploration and new energy[148] Business Review 2023 saw mixed business performance: drilling equipment surged over 200%, fracturing declined 50%, engineering stable, and new energy achieved records Drilling and Production Equipment and Related Products Business Drilling equipment revenue surged 216.8% to RMB 2.354 billion, driven by overseas expansion, with parts sales slightly down Drilling and Production Equipment and Related Products Business Revenue | Business Segment | 2023 Revenue (RMB) | YoY Change | | :--- | :--- | :--- | | Drilling Rig Sales | RMB 2.354 billion | +216.8% | | Parts Sales | RMB 2.198 billion | -2.5% | - Significant breakthroughs in overseas markets include signing high-end land drilling rig orders with Middle Eastern clients, winning a bid for an Indonesian geothermal automated drilling rig, and signing orders with 19 new clients[144] - As of February 29, 2024, outstanding order value for drilling rigs and related products business was approximately RMB 1.173 billion[145] Fracturing Equipment and Services Business Fracturing revenue decreased 50.4% to RMB 525 million due to cautious sales, but achieved technical service milestones - Fracturing business revenue was RMB 525 million, a 50.4% decrease from RMB 1.059 billion in the previous year, primarily due to the company adopting a more cautious sales strategy to mitigate risks[152] - As of February 29, 2024, outstanding order value for fracturing equipment and services business was approximately RMB 233 million[10] Oil and Gas Engineering Services Business Oil and gas engineering revenue slightly decreased 5.5% to RMB 396 million, with improved drilling efficiency and extended overseas contracts - Oil and gas engineering services revenue was RMB 396 million, a 5.5% year-on-year decrease[153] - A total of 10 domestic and international drilling teams achieved a total footage of 179,620 meters for the year, with overseas teams contributing the majority (148,530 meters)[5] - As of February 29, 2024, outstanding order value for oil and gas engineering services business was approximately RMB 435 million[158] New Energy Related Business New energy achieved significant progress in offshore wind and concentrated solar power, with record orders and first drilling rig energy storage commercialization - New effective orders for offshore wind pile foundation business reached a historical high, with jacket products holding a leading market share[154] - The concentrated solar power heliostat bracket intelligent manufacturing production line successfully commenced operations, achieving a monthly target of 2,000 sets, and completed delivery of over ten thousand brackets for the Gansu concentrated solar power project[7] - Successfully supplied 1 BESS energy storage system to Total, marking the first commercial application of a drilling rig energy storage system[7] Quality Management and Research and Development The company enhanced quality management with new certifications and achieved R&D breakthroughs in intelligent drilling rigs and low-temperature control - New qualification certificates obtained during the year include API Spec 7K, motor LVD certification, motor explosion-proof electrical CCC certification, and driller's cabin ATEX positive pressure explosion-proof certification[155] - A total of 135 patent applications were completed during the year (77 domestic invention patents), with 81 patents granted (50 domestic invention patents); "A Compact and Efficient Workover Rig and Method" and a lifting-type "One-Key Linkage System" received US patent grants[16] Human Resources Management Employee numbers grew 7.4% to 2,808 by year-end 2023, with focus on talent acquisition, performance optimization, and extensive training - As of year-end 2023, the number of employees was 2,808, a 7.4% increase from the previous year[16] - A total of 166 specialized training programs were conducted throughout the year, with 9,373 participants[17] Future Outlook The company anticipates stable oil and gas demand in 2024, focusing on market expansion, technological innovation, internal management, and ESG - Global oil demand is projected to increase by 1.24 million barrels/day in 2024, with stable growth in upstream investment and international oil prices expected to remain in a higher range, favoring stable demand for oil and gas equipment and services[18][21] - Market expansion strategy: focus on Middle East, Eurasia, and Latin America overseas; domestically, promote new product applications through services and expand into oil and gas field new energy markets[19] - Technology innovation strategy: increase investment in scientific and technological innovation, focusing on market and customer needs, implementing strategies like "dual-direction challenge" and "bid-winning horse racing" to accelerate breakthroughs[22] Financial Review In 2023, the Group's financial position improved significantly, with revenue up 22.3%, narrowed losses, and a stable asset-liability structure Key Financial Indicators for 2023 | Metric | 2023 (RMB) | 2022 (RMB) | Change | | :--- | :--- | :--- | :--- | | Revenue | RMB 5.473 billion | RMB 4.476 billion | +22.3% | | Gross Profit | RMB 542 million | RMB 460 million | +17.8% | | Gross Margin | 9.9% | 10.3% | -0.4pp | | Loss attributable to Shareholders | RMB 387 million | RMB 634 million | Loss narrowed by 38.9% | | Net Loss Ratio | 7.1% | 14.2% | Improved by 7.1pp | Revenue Analysis 2023 total revenue grew 22.3% to RMB 5.473 billion, primarily driven by a 216.8% surge in overseas drilling rig sales Revenue by Region (2023 vs 2022) | Region | 2023 Revenue (RMB Billion) | 2023 Share | 2022 Revenue (RMB Billion) | 2022 Share | | :--- | :--- | :--- | :--- | :--- | | Mainland China | 2.210 | 40.4% | 2.556 | 57% | | Middle East | 2.256 | 41% | 0.788 | 18% | | Africa | 0.538 | 10% | 0.941 | 21% | | Europe | 0.355 | 7% | 0.051 | 1% | | Other | 0.114 | 2% | 0.140 | 3% | Revenue by Business Segment (2023 vs 2022) | Business Segment | 2023 Revenue (RMB Billion) | YoY Change | | :--- | :--- | :--- | | Land Drilling Rigs | 2.354 | +216.8% | | Parts and Others | 2.198 | -2.5% | | Drilling Engineering Services | 0.396 | -5.5% | | Fracturing Business | 0.525 | -50.4% | Gross Profit and Gross Margin Gross profit increased 17.8% to RMB 542 million, but overall gross margin slightly declined to 9.9% due to fracturing business losses - Gross profit was approximately RMB 542 million, an increase of RMB 82 million year-on-year, representing a 17.8% growth[39] - Overall gross margin was 9.9%, a 0.4 percentage point decrease year-on-year, primarily dragged down by losses in the fracturing business[46] Period Expenses Period expenses generally increased, with distribution and administrative costs up, finance costs down, and total R&D investment growing 28.0% Period Expenses Details | Expense Item | 2023 (RMB Billion) | YoY Change | | :--- | :--- | :--- | | Distribution Expenses | 0.249 | +15.8% | | Administrative Expenses | 0.425 | +19.4% | | R&D Expenses | 0.112 | -9.7% | | Net Finance Costs | 0.176 | -6.9% | Annual Loss Annual loss significantly narrowed to RMB 387 million, improving the net loss ratio to 7.1%, with EBITDA turning positive to RMB 74 million - Loss before income tax was approximately RMB 411 million, a reduction of RMB 214 million from a loss of RMB 625 million in the prior year, a 34.2% decrease[49] - Loss attributable to owners of the company was approximately RMB 387 million, with a net loss ratio of 7.1%, a significant improvement from 14.2% in the prior year[55] - EBITDA was approximately RMB 74 million, compared to approximately RMB -102 million in the prior year, turning from negative to positive[52] Assets, Liabilities, and Cash Flow At year-end 2023, total assets were RMB 12.520 billion, liabilities RMB 8.938 billion, with improved gearing and positive operating cash flow Key Balance Sheet Data (Year-end 2023) | Metric | Amount (RMB Billion) | YoY Change | | :--- | :--- | :--- | | Total Assets | 12.520 | +1.97 | | Total Liabilities | 8.938 | -1.90 | | Total Equity | 3.582 | +3.88 | | Gearing Ratio | 71.4% | -2.7pp | Key Cash Flow Statement Data (2023) | Item | Amount (RMB Billion) | | :--- | :--- | | Net cash generated from operating activities | 0.062 | | Net cash used in investing activities | 0.051 | | Net cash generated from financing activities | 0.195 | | Net increase in cash and cash equivalents | 0.177 | Principal Risks and Uncertainties The Group faces market risks from oil and gas price volatility, international operations, competition, and financial risks including credit and liquidity - Principal market risks stem from oil and gas price fluctuations and their impact on oil and gas development activities[67] - The Group's financial risks include market risk (foreign exchange, interest rates), credit risk, and liquidity risk[74] Biographies of Directors and Senior Management This section provides detailed biographies of the company's executive, non-executive, independent non-executive directors, and senior management Executive Directors Executive directors include Chairman Mr Wang Xu and President Mr Zhu Hua, both with extensive management and technical experience - Mr Wang Xu, 50 years old, has served as Executive Director and Chairman of the Board since November 25, 2022, possessing extensive experience in production and corporate management[75] - Mr Zhu Hua, 40 years old, has served as Executive Director since July 4, 2022, and was appointed President on February 7, 2024, possessing extensive experience in technology and corporate management[83] Non-Executive Directors Non-executive directors included Mr Zhang Mi (resigned July 2023) and Mr Yang Yong (resigned Feb 2024), with Mr Zhang being a co-founder - Mr Zhang Mi, 67 years old, served as Executive Director, Chairman, and President from 2007 to 2021, and resigned as Non-Executive Director on July 31, 2023[76] Independent Non-Executive Directors The independent non-executive director team comprises five professionals with diverse backgrounds in engineering, finance, economics, accounting, and law - The independent non-executive director team comprises five individuals: Mr Chen Guoming, Ms Su Mei, Mr Chang Qing, Mr Wei Bin, and Mr Zhang Shiju, each possessing profound backgrounds in fields such as petroleum machinery, finance, economics, accounting, and law[85][78][86][81][87] Senior Management The senior management team consists of experienced professionals in international trade, finance, R&D, strategic investment, and corporate governance - Senior management members include Vice President Luo Xiaoming, Chief Financial Officer Jin Qian, Vice President Ren Jie, and Vice President and Company Secretary He Bin, possessing diverse professional backgrounds[93][94] Corporate Governance Report This report outlines the company's 2023 corporate governance practices, focusing on Board structure, committee operations, risk control, and shareholder communication Board of Directors The Board comprises seven directors, meeting listing rules, with separate Chairman and President roles, overseeing strategy and performance - The Board comprises 7 directors: 2 executive directors (Mr Wang Xu, Mr Zhu Hua) and 5 independent non-executive directors, with independent non-executive directors accounting for over one-third, meeting listing rule requirements[109][115][141] - The roles of Chairman (Mr Wang Xu) and President (Mr Zhu Hua) are separate, with the Chairman leading the Board and the President responsible for daily management and operations[272][267] Board Committees The Board has four committees: Audit, Remuneration, Nomination, and Strategic Investment and Risk Control, each with specific oversight responsibilities - The Audit Committee is composed of all five independent non-executive directors, with Mr Wei Bin serving as Chairman[303] - The Remuneration Committee comprises three independent non-executive directors and one executive director, with Ms Su Mei serving as Chairman[165] - The Nomination Committee consists of Chairman Mr Wang Xu and two independent non-executive directors[169] - The Strategic Investment and Risk Control Committee comprises two executive directors and one independent non-executive director, with Mr Wang Xu serving as Chairman[176] Risk Management and Internal Control The company employs a "three lines of defense" risk management framework, with the Board deeming the system effective and adequate for 2023 - The company adopts a "three lines of defense" risk management model: the first line is business and functional departments, the second is risk internal control departments, and the third is audit and other supervisory departments[216][217][222] - In 2023, the company improved systems such as the "Internal Control System Management Regulations" and "Risk Management Measures," and organized the identification and assessment of significant risks at the Group level[203] - The Board has reviewed the risk management and internal control systems for the year ended December 31, 2023, deeming them effective and adequate[201] Communication with Shareholders and Investors The company communicates with shareholders via various channels, including general meetings and its website, ensuring effective dialogue and rights protection - The company communicates with shareholders through various channels, including general meetings, its website (http://www.hh-gltd.com), and announcements[239] - Shareholders holding not less than one-tenth of the paid-up share capital may request to convene an extraordinary general meeting[232] - The company has adopted a dividend policy, which in principle allows for annual cash dividends of not less than 30% of the net profit attributable to shareholders for the year, provided conditions are met, but the Board recommended no dividend for 2023[257][62] Directors' Report This report covers statutory disclosures including business, performance, share capital, use of proceeds, and connected transactions for the reporting period Principal Business and Performance The Group is an investment holding company focused on R&D, manufacturing, and sales of drilling equipment and services, with no final dividend proposed for 2023 - The Group's principal businesses include manufacturing and sales of land drilling rigs, parts, and offshore drilling modules, as well as drilling engineering services[263] - The Board recommends no final dividend for 2023[264] Share Capital Changes and Use of Proceeds In July 2023, the company issued 3.684 billion shares to Oriental Investment, raising HKD 887 million, with proceeds reallocated to debt repayment and working capital - The company issued 3,684,494,251 ordinary shares to Oriental Investment, raising net proceeds of approximately HKD 887 million[380][381] Use of Proceeds and Application (As of February 29, 2024) | Original Planned Use | Planned Investment (HKD Million) | Amount Used (HKD Million) | Unused Amount (HKD Million) | | :--- | :--- | :--- | :--- | | Repaying interest-bearing borrowings | 505.44 | 503.08 | 2.36 | | Investing in offshore segment | 106.41 | 0 | 106.41 | | Supplementing general working capital | 274.89 | 252.97 | 21.92 | | Total | 886.74 | 756.05 | 130.69 | - The Board resolved to reallocate approximately HKD 106 million originally planned for the offshore segment to repay interest-bearing borrowings and supplement general working capital[383] Share Option and Restricted Share Award Schemes The company maintains share option and restricted share award schemes, with details on unexercised options and no new grants under 2017/2021 schemes - As of December 31, 2023, 48,690,548 share options remained unexercised under the old share option scheme[471] - The company adopted a new share option scheme in 2017, with a total of 513,742,090 shares available for issuance, representing 5.68% of the issued share capital, but no share options were granted by the end of the reporting period[474][485] - The company adopted a restricted share award scheme in 2021, but no restricted shares were granted by the end of the reporting period[364][514] Connected Transactions The Group engaged in ongoing connected transactions with its controlling shareholder and associates, involving product sales, procurement, and financial services - Engaged in procurement and sales of products and services with Dongfang Electric Corporation Group; actual procurement amounted to RMB 210 million (ceiling RMB 1 billion) and actual sales amounted to RMB 303 million (ceiling RMB 800 million) during the year[517] - Entered into a financial services framework agreement with Dongfang Electric Finance for deposit, loan, and settlement services; during the year, the daily maximum deposit balance was capped at RMB 1.8 billion, with actual transactions of RMB 0; the loan ceiling was RMB 1.8 billion, with actual transactions of RMB 0[310] Independent Auditor's Report Deloitte Touche Tohmatsu issued an unqualified opinion on Honghua Group's 2023 consolidated financial statements, highlighting impairment assessment of Ukrainian receivables and inventory provisions - Auditor's Opinion: Unqualified opinion, stating that the consolidated financial statements fairly and truly reflect the Group's financial position and performance[349] - Key Audit Matter One: Impairment assessment of trade receivables from a Ukrainian customer; significant management estimates are involved in assessing expected credit losses for this customer's receivables due to the Russia-Ukraine war[359] - Key Audit Matter Two: Inventory provision; significant management estimates are involved in assessing the net realizable value of inventory due to its material balance[492] Consolidated Financial Statements This section presents the Group's complete consolidated financial statements for the year ended December 31, 2023, including the consolidated statement of profit or loss, statement of profit or loss and other comprehensive income, statement of financial position, statement of changes in equity, statement of cash flows, and detailed notes, comprehensively reflecting the Group's operating results, financial position, and cash flows during the reporting period Consolidated Statement of Profit or Loss The 2023 consolidated statement shows revenue up 22.3% to RMB 5.473 billion, gross profit up 17.8%, and annual loss significantly narrowed to RMB 419 million Consolidated Statement of Profit or Loss Summary | Item (RMB '000) | 2023 | 2022 | | :--- | :--- | :--- | | Revenue | 5,473,234 | 4,476,104 | | Gross Profit | 541,773 | 459,893 | | Operating Loss | (199,862) | (433,203) | | Loss before Income Tax | (411,006) | (624,783) | | Annual Loss | (419,265) | (625,111) | | Loss attributable to Owners of the Company | (386,597) | (634,418) | | Basic Loss per Share (RMB cents) | (5.54) | (11.98) | Consolidated Statement of Financial Position As of Dec 31, 2023, total assets were RMB 12.520 billion, liabilities RMB 8.938 billion, and total equity RMB 3.582 billion, boosted by share issuance Consolidated Statement of Financial Position Summary (December 31, 2023) | Item (RMB '000) | Amount | | :--- | :--- | | Assets | | | Non-current Assets | 4,453,314 | | Current Assets | 8,066,225 | | Total Assets | 12,519,539 | | Liabilities and Equity | | | Current Liabilities | 6,762,104 | | Non-current Liabilities | 2,175,673 | | Total Liabilities | 8,937,777 | | Total Equity | 3,581,762 | | Total Liabilities and Equity | 12,519,539 | Consolidated Statement of Cash Flows 2023 saw net cash inflow of RMB 62 million from operations, net outflow from investing, and net inflow from financing, resulting in increased cash and equivalents Consolidated Statement of Cash Flows Summary | Item (RMB '000) | 2023 | 2022 | | :--- | :--- | :--- | | Net cash generated from/(used in) operating activities | 62,044 | (158,650) | | Net cash (used in)/generated from investing activities | (51,425) | 4,079 | | Net cash generated from financing activities | 195,356 | 25,262 | | Net increase/(decrease) in cash and cash equivalents | 205,975 | (129,309) | Notes to the Financial Statements Notes provide detailed explanations for financial statement items, covering accounting policies, segment info, asset/liability details, related party transactions, and risk management - Segment Information (Note 4): Detailed disclosure of revenue and profit for the four segments: land drilling rigs, parts and others, drilling engineering services, and fracturing business[554][561] - Trade Receivables (Note 21): Disclosed trade receivables from a Ukrainian customer of approximately RMB 468 million, with an impairment provision of approximately RMB 254 million[821] - Borrowings (Note 25): At year-end, the Group's total borrowings were RMB 4.470 billion, including RMB 3.370 billion in bank loans and RMB 978 million in related party loans[669] - Related Party Disclosures (Note 34): Detailed listing of various transaction amounts and outstanding balances with the controlling shareholder, Dongfang Electric Group, and its subsidiaries[937] - Financial Instruments and Risk Management (Note 35): Analysis of the Group's capital risk, credit risk, liquidity risk, and market risks (foreign exchange, interest rates)[1005] Five-Year Financial Summary This section provides a five-year (2019-2023) summary of key financial data and ratios, aiding in long-term analysis of the company's trends and financial changes Five-Year Financial Data Summary (RMB '000) | Metric | 2023 | 2022 | 2021 | 2020 | 2019 | | :--- | :--- | :--- | :--- | :--- | :--- | | Revenue | 5,473,234 | 4,476,104 | 2,936,604 | 3,931,492 | 4,425,686 | | Gross Profit | 541,773 | 459,893 | 363,004 | 1,180,365 | 1,315,834 | | (Loss)/Profit attributable to Owners of the Company | (386,597) | (634,418) | (717,191) | 49,660 | 107,472 | | Total Assets | 12,519,539 | 12,322,487 | 11,747,910 | 12,012,377 | 11,754,328 | | Total Equity | 3,581,762 | 3,193,995 | 3,746,396 | 4,494,627 | 4,480,377 | Five-Year Key Financial Ratios Summary | Metric | 2023 | 2022 | 2021 | 2020 | 2019 | | :--- | :--- | :--- | :--- | :--- | :--- | | Gross Margin | 9.9% | 10.3% | 12.4% | 30.0% | 29.7% | | Net (Loss)/Profit Margin | (7.1)% | (14.2)% | (24.4)% | 1.3% | 2.4% | | Current Ratio | 1.19 | 0.94 | 0.87 | 1.50 | 1.28 | | Gearing Ratio | 71.4% | 74.1% | 68.1% | 62.6% | 61.9% |